Electric vehicle shares have grown exponentially in recent years. As I’m writing, the NIO (NYSE: NIO) share price has risen by 192% in the past 12 months and the Tesla (NASDAQ: TSLA) share price has increased by 92%. But if I had to pick just one for my portfolio, which one would I choose? Here’s my opinion on the Tesla vs NIO debate.
Tesla stock
Tesla is one of the leaders in electric vehicle production and is headed by popular (and often controversial) figure Elon Musk. Investor confidence in his vision and ability to deliver is one of the driving factors behind Tesla stock.
The company showed outstanding financial performance yet again in its recent Q2 FY21 report. Total deliveries of Model S/X and Model 3/Y series jumped up to 201,304, for year-on-year growth of 121% since Q2 FY20. Revenues were also up with year-on-year growth of 98%.
The Tesla lithium-ion battery cars could face some trouble in the future though, with the development of hydrogen-based fuel cells. However, Musk himself has said via social media that he thinks the use of hydrogen is “staggeringly dumb”. While I don’t claim to possess the same scientific expertise as Musk, I wouldn’t be so quick to brush off the rise of hydrogen fuel cells. I think lithium companies in general could suffer from these developments.
NIO stock
NIO is one of the leading companies in China’s premium electric car market. It released its 2021 Q2 report last week and its results were certainly promising. Delivery of vehicles reached 21,896, showing an increase of 111.9% from the first quarter of 2020. Revenues increased to $1,308.4m, up by 127.2% from FY20 Q2 and there was a decrease in losses from operations.
NIO as well as Tesla, however, will face competition from traditional car manufacturers such as Volkswagen and Ford. Consumers might prefer the brands that they have trusted for decades. They might find it hard to claim that their founding innovation in the industry gives them the edge over these car manufacturing world-leaders.
Tesla vs NIO
Both companies are performing better financially and this is reflective of the EV and ESG market growth in general. So which one would I choose as an investment?
I’m not totally bearish on NIO. Its share price is certainly promising at $38.40, at the time of writing. This is a fraction of the price when compared to Tesla’s $682.47 share price. NIO could also benefit if US and Chinese geopolitical tensions rise, as the former being a Chinese company, is more likely to see favourable conditions in China over Tesla.
However, I think market share could be undermined in the future as traditional manufacturers are already releasing electric cars and this could be problematic for both companies. Based on this, I’m more inclined to take the ‘safer’ option and I believe that is Tesla, as it has higher deliverables, a more established basis and a bigger share of the market so far.
