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NIO, China's response to Tesla, took an electrifying start. Its explosive valuation makes even Elon Musk's company look like a godsend.
Including after hours trading, the share price nearly doubled Thursday, two days after the electric vehicle maker raised $ 1 billion in a first public offering on the New York Stock Exchange. This brought the market value of NIO to $ 14 billion, exceeding the likes of Korea's Kia Motor and Japan
Mazda Motor
.
The appeal is clear: NIO manufactures high-performance cars and China is the largest electric vehicle market in the world. The government has been the main driver of this market, and investors are betting that NIO could become the national champion of Beijing. Among the many contributors are Chinese technology giants Tencent and Baidu, as well as former investors Sequoia and Hillhouse Capital.
But the stock now seems a risky bet. NIO has been generating revenue for only a few months, after starting to deliver its only model, the ES8 – a seven-passenger sport utility vehicle with an all-aluminum body – in June. With a price about half that of Tesla's X model, he is a loser for NIO, who lost $ 712 million in the first half. At this rate, the company could use its $ 1.7 billion in cash by next year – and the pace of liquidity consumption should increase as it produces more cars.
According to Bernstein, bookings and shipments for ES8 correspond to those of the new S model in 2012. But at that time, Tesla's market value was only $ 4 billion.
According to S & P Global Market Intelligence, Tesla's current enterprise value is $ 49 billion. For NIO, this ratio would translate into a turnover of $ 7 billion over two years, a production rate of 110,000 cars per year, a very ambitious goal for a company that delivered 1,121 products last month.
And NIO did not even make these cars. Its factories are still under construction and it lacks the required manufacturing licenses. For now, she is counting on a public car manufacturer for production. And when Tesla got a head start – it was the pioneer of the high-yield EV market, that is, it faced competition from other startups, like Xiaopeng Motor, supported by Alibaba,
BMW
at Volvo. And Tesla, of course.
Investors need to get out of the stock when they are still moving fast.
Write to Jacky Wong at [email protected]
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