Nio stock surges as it tries to catch up with Tesla

Nio stock has now surged more than 1,000%, rivaling Tesla in more places than just the electric vehicle competition. The Chinese EV maker now has a greater market value than General Motors.

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Q3 2020 hedge fund letters, conferences and more

Nio riding high

According to Bloomberg, one year ago, Nio's sales were weak, and its cash were dwindling, placing it on the "brink of doom." However, the company is now a strong participant in the race to pick the big winners in the EV race, putting it on a footing with Tesla.

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The EV market in China is expected to grow quickly in the coming years, and investors have been betting that Nio will continue to do well while competition in the space heats up even further. However, there is no guarantee of success. The company still has small sales volume when compared to those of its larger rivals. Further, Nio hasn't turned a profit yet, and its marketing and development costs continue to rise, while pricing pressure increases.

Bloomberg Intelligence analysts warn that another round of price cuts on premium EVs in China could be just around the corner. That would further increase rivalry in the space.

Innovating in battery technology

Although design is an important part of the formular for all cars, including EVs, there are many other factors that make selling EVs different than selling conventional cars. Driving range, charging ease, battery technology and cost of ownership are all factors to take into consideration.

Bloomberg notes that Nio uses "flashy showrooms to lure buyers" and is offering an attractive package that's attracting fans quickly in China, which is the only market where it's selling cars for now. Interestingly, Nio's ES6 SUV starts with a base price of around $54,000, which is quite a bit higher than Tesla's Model 3.

However, Nio has been working on its battery technology and offering value-added services like upgrades and leasing, which lower the cost of ownership of the company's vehicles in the years following the purchase. Nio is also operating battery-swap stations and a fleet of charging cars to help drivers at its owner locations.

The company lags Tesla in sales volumes, but it has been catching up. Nio sold more than 5,000 vehicles for the first time last month. On the other hand, Tesla's registrations have held steady at about 11,000 to 12,000 for the lasts few months, according to the China Automotive Information Net.