Tesla (NASDAQ:TSLA) stock has famously made long-term investors a fortune. And I’ve heard that CEO Elon Musk has also made a few quid along the way.
But with the EV pioneer valued above $1trn today, I think it’s fair to assume that Tesla returns will be far less dramatic in future. Investors have probably missed the battery-powered boat when it comes to life-changing gains there.
But what about NIO (NYSE:NIO)? The firm gets called the ‘Tesla of China’, owing to its similarities in the premium EV segment. In New York, it has a far lower $15bn market cap, and has just reported its first-ever quarterly profit.
Might this one emulate Tesla’s incredible wealth-making success?
Similarities
Up by around 110% in the past year, NIO stock has already made some savvy investors solid returns. But over five years, it’s still down by 83%, while Tesla has gained roughly 55% (both in US dollar terms).
Looking at NIO, I do see some similarities to Elon Musk’s EV firm. First off, they’re both very innovative, with NIO building out its own battery-swapping stations. There, subscribing customers can swap a battery for a new one in just three minutes on average.
February saw NIO achieve a milestone of 100m battery swaps. According to the firm, these have saved users a total of 83.41m hours, averaging over 88 hours per user, compared with conventional EV charging.
There are now 3,790 NIO battery-swap stations worldwide, with around a third on major highways in China.
Interestingly, the company is opening up its network with other EV firms, which reminds me a little bit of Tesla opening up its Superchargers to rivals. Both were built to address range anxiety (still an obstacle to wider EV adoption).
Meanwhile, NIO has finally swung to a profit after years of losses (like Tesla). In Q4, it reported a net profit of RMB 282.7m (about $40m), a vast improvement on the year before. Revenue surged 75.9%, boosted by new and refreshed models.
Finally, NIO is big on AI, with its vehicles having a physical AI companion (NOMI) on the dashboard. Obviously Tesla is all-in when it comes to this technology (robotaxis, humanoid robots, and what not).
Differences
That said, I think AI gets to the heart of the difference between NIO and Tesla. The latter has always been valued on being more than an EV maker, especially today as it moves closer towards mass-manufacturing robotaxis and robots.
Also, back when these projects were still twinkles in Musk’s eye, Tesla had much of the EV market to itself. There was far less competition and its international growth was largely unimpeded, including in China.
In contrast, NIO is likely to face significant trade barriers in the US and Europe moving forward. And it’s likely to always be valued as an EV maker rather than transcending the category like Tesla has.
Another key difference is the discount that investors place on Chinese stocks because of geopolitical risk. At any point, Beijing can change the rules of the game, sending investors fleeing for the exit.
As such, I don’t see NIO as the next Tesla. The stock could still do well, especially if NIO becomes consistently profitable.
But neither is on my buy list today. I see better growth stocks elsewhere for my portfolio.
