Tesla Stock Hits Record High, NIO Ends in the Red

Tesla and NIO are two electric vehicle makers. However, that’s where the similarities end. While Tesla is a US company, NIO is China’s answer to Tesla.

Stocks diverge

Tesla stock (TSLA) hit an all-time high on Thursday with a 2.77% gain. The stock closed at just over $404. On the other hand, NIO stock (NIO) lost 0.38% on the same day. The stock isn’t trading too far from its record low. Lately, some analysts said good things about Tesla, while NIO is still looking for support from Wall Street.

Tesla deliveries are rising in China

Tesla saw its deliveries in China zoom by 14X in November. The company delivered 5,597 vehicles during the month, according to China Automotive Information Net. Last November, Tesla delivered 393 vehicles in China. The company’s performance in China is even more impressive considering the weakness in China’s auto market. China’s auto sales fell 3.6% in November, which marked the 17th consecutive monthly decline. In November, new energy vehicle sales fell more than 43%. There were rising deliveries amid the weak Chinese auto market.

Recently, Tesla opened Gigafactory 3 near Shanghai to produce the Model 3 locally. Gigafactory 3 will help the company cut production costs and tap into the Chinese auto market in a bigger way. Oppenheimer analyst Colin Rusch was positive about Gigafactory 3. In a note, he said that “expectations for a relatively smooth (production) ramp of Tesla’s China facility are increasing.” Tesla is also increasing the prices of imported Model 3s to promote locally made cars in China.

NIO deliveries were flat in November

Meanwhile, NIO’s deliveries in China were flat in November compared to October. However, the company is doing better than some of its peers. NIO delivered just over 2,500 units in November—mainly ES6 SUVs. The ES6 deliveries fell 7% month-over-month to 2,067 units. The ES8 deliveries came in at 461 units. The company plans to launch an updated version of the ES6 soon.

So far, NIO has sold 28,734 ES6 and ES8 electric vehicles—17,395 units were sold in the first 11 months of 2019. NIO stock has lost 59% this year due to the macroeconomic environment and company-specific issues.

Competition is rising in China’s EV segment

NIO’s ES6 and ES8 are both SUVs. Tesla is launching its Model Y next year, which could make things worse for NIO. The Model Y will be priced in the $40,000 range, which makes it relatively affordable. Tesla will produce Model Y in the Shanghai Gigafactory, which will help it compete with local players like NIO.

Ford is also flexing its muscles in the electric vehicles segment. Recently, the company unveiled its Mach-E based on the Mustang platform. Mach-E will be priced to compete with Model Y and Model 3. Ford is also launching its electric F-150. The company wants to revive its fortunes in China by introducing new models and investing in electric vehicles, which could add to the competition in China. Volkswagen and General Motors also want to go big in China.

Tesla is still ahead of the competition

On Monday, Credit Suisse analyst Dan Levy, a Tesla bear, said, “We believe Tesla is leading in the areas that will likely define the future of carmaking – software, and electrification.” Talking about the company’s lead in batteries, he said, “Tesla is likely ahead of others on batteries – the core of the electric powertrain.” Interestingly, Levy has still kept the target price on Tesla stock at $200, which is less than half of Thursday’s closing price. Last month, he warned that Ford Mach-E could be the first real competition for Tesla. He said, “Ford’s new [electric vehicle] should provide a more compelling alternative at the Model 3 price range than the other comps, especially given the performance focus.”

This week, Jim Cramer, CNBC’s Mad Money host, said, “I’m not saying one’s safer than the other, I’m saying they both have just O.K. balance sheets, but one’s got more upside.”

In the US, Tesla accounts for 80% of electric vehicle sales. In China, Tesla is zooming. The company’s production ramp-up in China will likely be smooth. As a result, the competition will have to work really hard to catch up.

Analysts’ recommendations

Among the 33 analysts covering Tesla stock, only 11 recommend a “buy,” while two recommend a “sell.” According to the Wall Street analysts surveyed by Reuters, the average target price on the stock is $295, which translates to a 27% downside over the next 12 months.

Among the 14 analysts covering NIO stock, only two recommend a “buy,” five recommend a “sell,” and seven recommend a “hold.” The average target price of $3.07 on NIO stock translates to 17.2% upside over the next 12 months based on Thursday’s close.