With or Without Apple Partnership, Nio Is Still a New Year Buy

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Of all my stock-picking mistakes in 2020, not getting on the Nio (NYSE:NIO) bandwagon and recommending NIO stock sooner is one of my biggest regrets.

A Nio (NIO) store at night in Shanghai, China.
A Nio (NIO) store at night in Shanghai, China.

Source: Robert Way / Shutterstock.com

I waited until June to give the Chinese electric vehicle (EV) maker the thumbs up. In hindsight, once it got $1 billion in funding back in April, I should have realized the tide had turned positively. However, that’s water under the bridge now.

Today, NIO sits around $48.37, about 644% higher than it’s low on Jun. 24.

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Now heading into 2021, the news suggests Apple (NASDAQ:AAPL) might consider a Chinese EV maker like Nio as its strategic partner to make an upcoming Apple car or truck. With or without that partnership, though, the EV maker should do just fine.

Here’s why.

Potential Apple Partnership and NIO Stock

Although the Apple’s history of interest in cars goes all the way back to Steve Jobs, the company only got going in earnest with “Project Titan” in 2014.

Several stops and starts since, Reuters recently reported that the company is moving forward with plans for its own self-driving vehicle by 2024. They note:

“Apple has progressed enough that it now aims to build a vehicle for consumers, two people familiar with the effort said, asking not to be named because Apple’s plans are not public. Apple’s goal of building a personal vehicle for the mass market contrasts with rivals such as Alphabet Inc’s Waymo, which has built robo-taxis to carry passengers for a driverless ride-hailing service.

“Central to Apple’s strategy is a new battery design that could ‘radically’ reduce the cost of batteries and increase the vehicle’s range, according to a third person who has seen Apple’s battery design.”

However, given what’s happened in 2020, it doesn’t seem realistic that Apple will meet its production goal. Investors should expect a year-or-two delay in a best-case scenario.

Plus, as of today, there is no indication whether Apple will go it alone (it does have the financial might to do so) or if it will partner with a firm like Tesla (NASDAQ:TSLA), Volkswagen (OTCMKTS:VWAGY) or even Nio. Wedbush Securities analyst Dan Ives recently predicted the following:

“We believe based on our investor conversations over the last few days that many on the Street would rather see Apple partner on the EV path, than start building its own vehicles/factories given the margin and financial model implications down the road, coupled with the strategic product risk around such a gargantuan endeavor.“

In fact, Ives believes that the odds of a strategic partnership are as high as 70%. Ultimately, were the partnership successful, you would then see Apple move to its own manufacturing platform.

I’ll continue to watch with interest for any developments in this area. However, handicapping the outcome at this point would be a futile endeavor. We’re a long way off from an announcement.

And in the meantime, NIO stock has plenty of positives in store.

Nio Has Got a Lot on the Table

In my most recent article on NIO stock, I noted that the company could have as many as five vehicles to sell by early 2022.

Already, the EV maker boasts the ES8, ES6 and EC6, with the latter officially launching at the end of 2019 and actual deliveries beginning in September. In the third quarter of 2020, Nio delivered 12,206 vehicles. That’s almost three times greater than its deliveries in the same period a year earlier.

Year-to-date (YTD), the company has delivered 26,375 vehicles — 114% higher than in the first nine months of 2019. And it’s getting busier.

What’s more, the company is expected to launch a new sedan in January at its annual “Nio Day.” On the heels of that, it’s also expected to launch a second sedan at Nio Day 2022.

Finally, many think Nio Day 2021 will bring the launch of a bigger and better battery, too, as well as further news about the car maker’s autonomous driving efforts.

In fact, the business has gotten so good that analysts believe it could capture a sizeable share of the premium EV market in short order. Investor’s Business Daily reports:

“JPMorgan expects the EV share of the total China car market to quadruple to 20% in 2025 from under 5% in 2019. The costs of producing EVs and traditional vehicles will reach parity by 2023, driven by lower battery costs, the firm says.”

CEO William Li projects the company will reach an annual production of 150,000 vehicles by the end of 2021. Nio has also set a long-range goal of 300,000 annually.

Needless to say, with or without Apple, this name is going to be busy for the next few years.

Bottom Line

I continue to read about the deceleration of EV sales in 2020 due to Covid-19. However, while that might be true, the long-term outlook for EV sales still looks bright to me.

So, until proven otherwise, I will continue to bang the drum for NIO stock. In my opinion, it remains an excellent long-term buy.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

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