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