Jim Cramer Wants You to Switch to Tesla Stock from NIO—Should You?

The former hedge fund manager and Mad Money host on CNBC, Jim Cramer frequently airs his views on stocks and investment recommendations. After the sell-off in the EV space, people want advice from major investment professionals regarding their views on EV stocks after the sell-off. What are Cramer’s views on NIO stock?

After a more than 1,100 percent rise in NIO stock in 2020 and a pullback this year, investors want to know if it's the right time to enter the stock. The company has made several positive announcements lately, including an international entry, starting with Norway and almost doubling its production capacity.

NIO stock has pulled back lately. Due to the rotation from growth to value, global chip shortages, and the otherwise soaring valuations of EV stocks, the EV sector has seen a sell-off. NIO stock has been part of that sell-off. However, based on a number of factors, the stock’s outlook seems bright.

Most of the negative factors that have dragged the stock down have already played out or are almost over. NIO stock has factored in most of them already. While factors like market rotation and chip shortage are temporary, the company has a more secular growth story backed by China’s rising appetite for EVs.

There are enough company-specific factors to keep the stock price buoyant for years to come. The company has taken the first step towards international expansion, starting with Norway. This as well as the expansion to Europe potentially to the U.S. market should open up new markets for NIO. Its brand loyalty, focus on quality, improving execution with rising deliveries, and new and improved products in the pipeline, NIO’s long-term value could rise by multiples of the current market price.

Cramer’s latest recommendation for NIO stock is to switch to Tesla. Cramer hasn't been very fond of NIO since the beginning. However, as the stock kept rising, he admitted in November 2020 that NIO took off and he was late to the party. In January this year, Cramer affirmed that Tesla has a challenger in NIO. He made this call soon after NIO unveiled its sedan ET7. Cramer said that ET7 has a ton of features, including an Nvidia-based self-driving solution. He concluded that with a lot of features in its newest vehicle, NIO could rival Tesla in the electric vehicle market.

This is a big deal given how firmly Cramer is positive on Tesla. However, his most recent call on NIO, which he made during CNBC’s Lightening Round, wasn't very bullish on NIO. In fact, he wants investors to switch to Tesla from NIO because he thinks that this is the “single best time to buy Tesla.”

While Cramer might like Tesla over NIO, I think that NIO has more upside than Tesla currently. In fact, Tesla’s recent problems in China, including spying charges, consumer complaints, and regulatory scrutiny, place NIO in better stead in China. Tesla is also counting on China to be its growth engine over the coming few years. In the brewing tech war between China and the U.S., China might favor its home-grown EV brands, including NIO over Tesla. This could come as a rude shock to Tesla and its soaring valuation.

In March 2021, Cramer shared his top three EV picks. He thinks that QuantumScape, Fisker, and Lucid Motors could be profitable bets in the EV space. Cramer thinks that QuantumScape, the company that's focused on manufacturing EV batteries, is one of the most legitimate players in the space. He also defended the company after it was accused by short-seller Scorpion Capital of a pump and dump scheme. QuantumScape’s future could be very bright if the company is able to execute on its promised technology of solid-state batteries.

Cramer also likes Fisker, especially after the sell-off in the EV space rendered it cheap, in his opinion. When the president and CEO of ServiceNow, Bill McDermott joined Fisker’s board, Cramer’s bullishness in the stock only grew. He likes McDermott and thinks that he's a legitimate guy.

Cramer is also bullish on Lucid Motors. In fact, he said that Lucid could be the next Tesla. He likes Lucid’s potential since the company is building huge Greenfield plants. Cramer also likes the backing from solid investors for Lucid.

Lucid is placing itself as a competitor to Tesla but in a more luxury EV space. It's also following a strategy similar to Tesla by launching a luxury car first to create a buzz around its name and plans to follow it up with more mainstream models. However, I think that there are many risks, including execution risks that Lucid needs to go through to be even able to come near to Tesla. It hasn’t delivered its first vehicle yet. So, there's a lot more to see in Lucid before we can bill it as the next Tesla. At other times, Cramer has also mentioned that he likes XL Fleet and EVBox.