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Could NIO Stock Yield Stellar Returns like Tesla in Long Term?

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NIO

In the previous part, we discussed why NIO’s (NIO) recently launched ES6 electric vehicle (or EV) could attract more customers as compared to its more expensive ES8 in China. While NIO’s ES6 might not have received huge reservations initially like Tesla’s (TSLA) Model 3, the vehicle is likely to help NIO expand its consumer base. The demand of the ES6 car model could be important for NIO at this stage to determine its future plans and growth prospects.

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NIO and Tesla

Since its listing on NASDAQ, Tesla stock has yielded overwhelmingly positive returns for its investors. TSLA started trading on NASDAQ in June 2010, and its IPO was priced at ~$17.00 per share. As of December 18, 2018, the company’s stock was trading at $337.03, which means TSLA has yielded slightly lower than 1,900% returns for its investors so far since its IPO.

Chinese electric carmaker NIO has many similarities with Tesla, but it still doesn’t have the advantage of being the trend initiator in the EV segment (XLY) as Tesla has. When Tesla started selling its well-designed first mass-market electric car Model S back in 2012, there were virtually no automakers who were producing such premium EVs. This also acted as one of the key factors that helped TSLA stock keep soaring for years after its public listing.

NIO still has a huge opportunity as it belongs to the world’s largest EV market, China, where it may also benefit from low production costs and government subsidies. Nonetheless, NIO has to face huge competition not only from its domestic EV makers but also from foreign automakers including Tesla.

In addition, since its listing on NASDAQ in September, NIO’s stock has largely witnessed wild movement with huge volatility, which also could increase its risk profile.

As of December 18, NIO, TSLA, General Motors (GM), and Ford (F) were up 1.3%, up 27.3%, up 3.7%, and down 8.4% quarter-to-date, respectively.

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