Nio is Tesla (TSLA)’s most viable competitor, set to blossom in 2021

With the 2020 year ending soon, Nio and Tesla (TSLA) stock are seeing great movement. This year will mark Tesla’s first year selling in China with a commanding position in the world’s biggest electric-vehicle market.

While Tesla regularly topped monthly premium EV sales tallies this year, helped by the sedans churned out from its multibillion-dollar plant opened to much fanfare in Shanghai last December, 2020 was also marked by rivals catching up. In 2021, the breadth of the competitive attack that Tesla faces will be greater than ever.

A trio of local champions Nio, Xpeng and Li Auto. has emerged as the front line against the Palo Alto, California-based company. All traded in the U.S., and enjoying backing from government entities or internet giants, the three startups are quickly winning fans, with sales of their electric SUVs, sedans and crossovers also rising in 2020 and their shares surging on Tesla’s coattails.

The local threat

China is Tesla’s largest market after the U.S., with sales in Asia’s biggest economy topping 120,000 units this year, according to local registration data. And Tesla keeps ramping up production in Shanghai, prompting analysts to forecast that China will account for a bigger slice of its sales and earnings in the years ahead.

The Model 3 sedans Tesla sells in China have higher profit margins than its vehicles in the U.S. and Europe, and China could make up more than 40% of Tesla’s sales by early 2022, Wedbush Securities analyst Dan Ives said in a Dec. 21 research note. That compares with about 20% now.

Nio, the biggest of the Chinese trio, has steadily boosted sales of its electric SUVs that it sells at a price as much as 40% higher than Tesla’s Model 3. The company’s retail strategy includes clubhouses with showrooms, lounges, work spaces, theaters and even camp activities for customers’ children. A Tesla price cut earlier in the year added some pressure, but a subsequent reduction failed to have a similar impact, Nio CEO William Li said on a recent earnings call.

Xpeng similarly has seen brisk sales growth, helped by lower prices than Tesla’s. The company, which touts the smart features of its vehicles, raised $2.2 billion this month selling additional stock, capitalizing on a recent share-price surge.

Nio to report delivery sales this week

It is expected that Nio will report the numbers of deliveries they made this month on or about January 1. Many investors predict that Nio will report that the delivery of vehicles went up significantly. With the anticipation of delivery and Nio Day, the stock price could run up bigly.

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Jay Lorrence
Investor of 12 years and Managing Editor of Money Midnight, a news outlet focused on highly profitable investment ideas and bold underground research.
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