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Why China’s NIO Is Besting Its US Peers—and the US Market

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NIO

Chinese electric car maker NIO (NIO), popularly known as China’s Tesla (TSLA) killer, has been breaking the rules of market gravity. The stock has surged 20.3% so far this month as of November 14 compared to the 0.4% fall in the S&P 500 Index.

Meanwhile, companies (XLY) such as General Motors (GM) and Ford Motor Company (F) have fallen 3.7% and 0.1%, respectively, in November so far. NIO’s direct US peer Tesla has inched up 2.0% this month. Let’s find out what could be driving NIO stock lately.

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It can’t be NIO’s financials

In the third quarter, NIO reported an increase in its adjusted net loss per share to ~10.35 Chinese yuan (or ~$1.51). The company’s net revenue stood at 1.470 billion yuan (or ~$214.0 million). Read Digging Deeper into NIO’s Q3 2018 Earnings Report to learn more.

However, the third quarter was the first quarter during which NIO’s ES8 vehicle model production continued for an entire quarter after beginning in the second quarter on June 28, so we may not come to any conclusions by analyzing its sequential or year-over-year growth. In addition, NIO missed Wall Street analysts’ estimates for its third-quarter earnings and revenue, so its financials shouldn’t be the reason for the recent rally in its stock.

The upcoming launch of ES6

In the third quarter, NIO continued to develop its five-seater premium electric SUV (sport utility vehicle) ES6 model. The company expects to launch the ES6 model by the end of 2018. During NIO’s third-quarter earnings call, CFO Louis Hsieh said, “We utilized the time during the slower holiday period to modify our production line in our JAC/NIO plant to prepare for the future launch of our ES6.” Hsieh is referring to China’s seven-day Golden Week national holiday in the third quarter.

Investors’ high expectations for NIO’s upcoming SUV ES6 could be driving its stock higher as ES6’s launch event draws closer. These expectations could move NIO stock higher in the near term. However, ES6’s demand and supply equation will be a critical factor in deciding NIO’s medium- to long-term stock price movement.

Today, at 1:30 PM EST, NIO stock was up 3.5% from its previous day’s closing price. At the same time, China’s Alibaba (BABA) and Baidu (BIDU) were up 3.6% and 1.5%, respectively, while TSLA was up 0.5%.

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