Could investing in NIO stock today be like buying Tesla in 2015?

With electric vehicle stocks down, could now be the perfect time to buy NIO stock? Dylan Hood takes a closer look at its future.

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Global sales of electric cars rose over 43% to more than three million in 2020, despite the pandemic. Tesla has continued to dominate the electric car manufacturing industry, with over 500,000 vehicles sold last year. However, with a monstrous market cap of over $650bn, could alternative electric vehicle stocks offer greater upside potential in the future? An electric vehicle growth stock that I think could follow in Tesla’s footsteps is NIO (NYSE:NIO).

NIO production accelerated through 2020

2020 proved a huge year for the Chinese electric vehicle manufacturer, with its share price surging over 1,100%. In a report issued in early January, NIO highlighted a 113% increase in production, delivering a total of 43,728 vehicles in 2020. What’s more, reports in early February showed investors that delivery of vehicles had upped to 7,225 throughout January 2021, marking a 352% year-on-year increase and giving the company huge momentum.

The electric vehicle market is vast and is estimated to be worth nearly $803bn by 2027, a figure that I believe represents the potential of a business like NIO. In addition to this, company founder and chairman William Li has unveiled plans to penetrate the European market through the second half of 2021, which should mark another scale up of production and extend market reach.

Recent growth stock problems

Recently, NIO stock has seen a dip in its share price, contrasting with last year’s gains. Many growth stocks have witnessed significant decline over the past few weeks due to inflation concerns, as they are especially sensitive to interest rates. With the 10-year US Treasury yield jumping above 1.4%, investors seem to be banking last year’s profits and seeking safer investments. However, this does provide a discounted share price for me.

Future competition

More concerns may arise when opening the floor to NIO’s potential competition. Tech powerhouse Apple has hinted at plans for the production of its own ‘Apple Car’ since 2014 and is currently planning a deal with Hyundai and Kia scheduled for completion by 2024.

Household car manufacturer Ford has pledged $11bn for electric vehicle investments from 2018 to 2022. General Motors has set aside an even greater $27bn for electric and autonomous vehicle research and innovation, which it anticipates will allow the release of 30 new electric vehicles to the global market within the coming five years.

Should I buy NIO stock?

Trading at a fraction of market giant Tesla’s share price, I think the future could look bright for NIO. Penetrating the European market through the tail end of this year certainly seems like a great move for the Chinese-based company, with many European markets already ushering in policies to begin a switch to electric travel. What’s more, the year-on-year momentum of NIO is undeniable and paves the way for an exciting future.

However, NIO still has to fend off fierce competition and growing inflation worries throughout 2021. But as a current investor I will be holding for the long term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Dylan Hood owns shares in NIO and Tesla. The Motley Fool UK has no position in any company mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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