After a slow IPO, electric carmaker NIO is unfazed by stop-and-go stock prices

NIO went public in the US in an underwhelming IPO, but the backing of China’s EV industry will help the company accelerate.


September 13, 2018

Why? Chinese EV subsidies.

Chinese electric carmaker NIO’s $1B IPO fell short of expectations, valuing the company at $6.42B instead of a desired $20B. As their stock swung yesterday, analysts cautioned investors that NIO would suffer due to its fragmented production and Tesla-turmoil. 

But, by aligning themselves with the booming EV (electric vehicle) market in China, NIO may have a smoother road ahead than Tesla.

Betting big on China’s r-EV-olution

Last year, China produced as many electric vehicles as the rest of the world combined. Yet, China’s EV market (the world’s largest) is still growing 2x as fast as America’s. 

How is this possible? Easy: Huuuge subsidies. In the last decade, the Chinese government has spent more than $22B to finance EV production.

But in the US, the private sector is in the EV market’s driver seat — leaving Elon Musk in charge of building the country’s EV infrastructure.

Tesla is a big car… on a small highway 

Right now, Tesla IS the American EV industry. And, since investors flip out anytime Elon Musk types a Tweet or smokes a blunt, it’s a volatile one at that. 

But China’s EV industry isn’t so fragile — NIO is just 1 of 7 big EV companies that have raised more than $1B (and they’re all supported by public utilities and state subsidies).

NIO didn’t outsource production and IPO in the US by accident, but because it could afford to — thanks to a stable, subsidized market.

The road ahead is long — but NIO’s not alone

After tumbling 15%, NIO’s stock rebounded to finish up 10% on Day 1. NIO, which had delivered 481 cars when it announced its IPO, delivered 1.6k cars at the end of August — with 15.7k more on the way. 

Tesla delivered 200k cars in the US this year. But as Tesla grows, it actually loses support from the government (Tesla customers only get the $7.5k EV tax credit up to 200k units).

Meanwhile, as NIO accelerates production to catch Tesla, the Chinese government seems happy to provide training wheels.

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