Tesla vs. Nio share price: The race that never quite started

Fifteen months ago, just before Chinese electric car maker Nio’s US$1.15 billion initial public offering on the New York Stock Exchange, observers were hailing it as the new Tesla, and a company that could eventually give the US pioneer a run for its money.

Tesla rising, Nio falling

The picture today, however, is a vastly different one.

On Wednesday, 18 December, Tesla Motors Inc saw share prices smash its previous ceiling of US$385.50, to hit an all-time high of US$394.85 per share.

That very day, it was reported that the US carmaker was considering slashing the retail launch price of its upcoming Model 3 sedan by at least 20%.

Compare this with Chinese rival Nio Limited, a company founded in 2014 with a vision to reinvent smart car technology. Shares of the Shanghai-based manufacturer has rapidly declined in the past year on the back of mounting losses.

In November 2019, share prices fell to a record-low of US$1.52 per share, a stark contrast from the US$9.90 price tag that it launched with in September last year.

The price tumble has come on the heels of back-to-back quarterly losses. In the second quarter of its fiscal year 2019, Nio recorded a net loss of 3.29 billion yuan, and an additional 2.6 billion yuan in the preceding period.

The Tesla case

With Model 3 hitting China showrooms in January 2020, and the arrival of its CyberTruck model in the US within the next two to three years, the road ahead for Elon Musk’s brainchild seems paved with gold.

If anything, the long-term bull case for Tesla stocks has inflated, rather than softened.

One Tesla bull, Catherine Woods, founder and CEO of New York-based ARK Invest, believes that the stock will eventually be valued at US$4,000 per share, with a production output of 1.5 million electric vehicles per annum by 2023.

In the immediate, 11 of 33 analysts polled by CNN Business said to ‘buy’ Tesla shares for the month of December, while ten said to ‘hold’, nine to ‘sell’, one to ‘outperform’, and two to ‘underperform’.

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Despite this optimism, at least one analyst has warned investors not to get too carried away, just yet.

John Thompson, Chief Investment Officer of Vilas Capital, warned in June that the company is ‘without any doubt’ on ‘the verge of bankruptcy’, although this was before it turned in a profitable third quarter, surpassing industry predictions.

Meanwhile, there have also been multiple reports about Elon Musk’s erratic behaviour behind-the-scenes over the years that could prove problematic down the road.

Nio: Difficult road to recovery ahead

For Nio, the future looks bumpier.

Although share price has climbed back above US$2.50 per share, rallying nearly 55% from November’s low, investors and analysts alike are still waiting with bated breath.

The company recently launched a new SUV domestically, but it was largely overshadowed by news of Tesla’s Model 3 receiving a buyer subsidy from the Chinese government.

It also does not help that it was reported shortly after that the company had laid off 141 employees at its North American headquarters in San Jose, California – with more cuts likely.

Latest broker ratings also do not fare much better than those from three months earlier. As of December 2019, only two of 14 analysts polled by CNN Business said to ‘buy’ Nio stock, with seven on ‘hold’, three on ‘underperform’, and two on ‘sell’.

JPMorgan analysts Ryan Brinkman and Rebecca Wen had wrote in a note in September that they were withdrawing their price target on Nio, as ‘the latest industry sales and pricing data have not shown improvement’.

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