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Tesla's Newest Competitor Will IPO This Week

Written by Monica Savaglia
Posted September 10, 2018 at 8:00PM

It’s going to be a very interesting week, as Tesla’s newest competitor is preparing for its market debut.

A couple weeks ago, I mentioned an IPO that’s expected to take place this Wednesday, September 12th. A Chinese electric carmaker, Nio Inc., is going to start trading on the U.S. markets, and it could add more fuel to an already booming IPO market.

It’s been a glowing year for IPOs, and Nio has the opportunity to continue the robust IPO market in the second half of 2018.

Electric vehicles (EVs) are shaping the future of the automotive industry. According to the Global EV Outlook 2017 report from the International Energy Agency (IEA), registered plug-in and battery-powered vehicles on roads worldwide rose 60% from the year before.

Government agencies, like the U.S.’s Environmental Protection Agency (EPA), are setting limits on carbon dioxide emissions, which is directly affecting automakers.

In order to keep their businesses afloat, they’ll need to comply with these new government policies. If automakers don’t follow these policies, they will be penalized.

In 2015, Volkswagen felt the wrath after it failed to comply with emerging environmental regulations. This incident compromised the company’s brand image. And no company wants its image to be damaged.

Without a doubt, EVs are the obvious choice for automakers and consumers.

A Major Shift Is Upon Us

We’re experiencing a major shift right now, and for a variety of reasons...

Statista has identified China as the largest market for all-electric vehicles. The demand for EVs in China is growing. SUV EVs sales in China continue to climb. In 2013, there were 3.7 million units. Last year, in 2017, there were 10.8 million. That’s a CAGR of 30.7%.

But China isn’t the only country seeing EV demand grow. The U.S. and Norway are right behind China, as government incentives like subsidies and exemptions from tolls and parking fees are starting to be more prevalent.

Countries are seeing China’s success in the EV market. They’re recognizing the market opportunity, and they can’t ignore it. And quite honestly, it would be idiotic to ignore it.

Most American households have vehicles to get them from point A to point B. Vehicles play an important role in American lives — going to work, taking your kids to school or after-school activities, getting groceries, visiting relatives... the list could go on. I would be at a loss if I didn’t have my car.

According to a Statista survey, there hasn’t been much change in the number of vehicles per household in the U.S. from 2006 to 2016. In 2006, the average number of vehicles per household was 2.05, and in 2016, that number dropped to 1.97. But what you should take away from Statista’s survey is that Americans depend on their vehicles and have at least one per household.

With new government policies getting put in place to help the environment that will also raise gas prices, electric vehicles are going to be the best alternative for all households, helping people get where they need to go while also saving money and the environment.

Nio’s IPO Could Have a Huge Impact on the U.S. Market

Tesla was the U.S.’s bestselling EV brand in 2017, but with the emergence of Nio on the U.S. market, that could all be changing...

Nio is a Shanghai-based maker of high-performance electric cars. On Wednesday, September 12th, it plans to offer 160 million shares at an expected price range of $6.25 to $8.25. If all goes well with the IPO, Nio could raise up to $1.16 billion in addition to its market cap of $8 billion. Underwriters for the company’s IPO are J.P. Morgan, Citigroup, and CICC.

Nio plans to use its IPO proceeds accordingly: 35% to marketing, 40% to research and development, and 25% to development of the company’s manufacturing facilities.

Nio’s business plan is similar to that of Tesla (Nasdaq: TSLA), which also specializes in electric vehicles. In the past month, Tesla has seen its stock plummet. On August 10th, share prices were at $353.64, but as of open on Monday, September 10th, shares were at $237.26 — a 32% decrease in one month.

Nio’s IPO is similar to when Tesla IPO’d in 2010. Tesla went through its IPO despite showing no revenue in 2006 and 2007 and only $14 million in 2008. Nio had no revenue in 2015 and 2016, and in 2018, it accounted for $6.7 million on June 30, 2018. Both companies showed large losses before their IPOs. And Tesla went on to become a household name and a company investors wanted to invest in.

Despite those similarities, investors are becoming skeptical of Tesla’s ability to hit its third quarter production target for its Model 3. Tesla continues to lose investors because of its inability to follow through with its projections, and some might even say the company has bitten off more than it can chew.

This could give Nio the opportunity to step in and provide optimism to investors who are interested in the electric vehicle market. As I mentioned earlier, the EV market is on the rise, and investors want in. And they should get in on a company that meets projections and will be able to stay focused and dedicated to the EV market.

Nio will IPO this Wednesday, September 12th. It's a company you'll want to keep an eye on.

Until next time,

Monica Savaglia

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.


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