The field of stocks in the electric vehicle (EV) sector has been growing rapidly. Investors can now choose from among a host of legacy automakers working to transition from internal combustion, start-ups with much promise, and established EV manufacturers that continue to grow.
Chinese EV maker Nio (NIO 3.49%) is in that third group, but its stock has been out of favor on Wall Street in 2021 -- the stock price is down about 17% year to date. However, if you take a closer look at some data related to the company and its market, you'll see that Nio has the potential to deliver much better results from here.
Here are three charts that should have Nio investors excited.
Nio ET7 electric sedan in aerodynamic testing. Image source: Nio.
1. Nio has more room to run
This year's lackluster returns from Nio should be put in perspective. Its stock handily outperformed Tesla (TSLA 12.06%) in 2020.
NIO data by YCharts
But calendar years are an arbitrary and incomplete way to gauge returns, and Tesla, of course, has been the king of EV stocks over the longer term. While Nio has slipped during 2021, Tesla's share price has continued to rise, pushing the EV leader's market cap above $1 trillion. Nio, meanwhile, is valued at slightly over $60 billion.
2. Measuring the market shows plenty of growth ahead
Tesla built its first non-U.S. manufacturing plant in China for a reason. China is the largest global automotive market. But Europe overtook it as the largest market for EVs in 2020, as measured by new registrations, according to the International Energy Agency (IEA). And while Tesla is growing its footprint in China, Nio is pushing into the European market. It launched sales in Norway in September, and next year will begin doing business in Germany.
Sales of electric passenger cars have soared in recent years, and the IEA predicts that growth will remain dramatic over the next decade. The data below is for battery electric vehicles and does not even include plug-in hybrid vehicles, which some consumers may pick as stepping stones in their transitions to fully electric vehicles.
| Metric | 2015 | 2020 | 2025 (Forecast) | 2030 (Forecast) |
|---|---|---|---|---|
| Passenger EV Sales (Global) | 700,000 | 6.8 million | 29.6 million | 80 million |
Data source: IEA 2021 Global EV Outlook
The IEA's estimates represent its stated policy scenario for passenger cars. It also sees the possibility of more than 138 million passenger battery electric vehicles sold cumulatively by 2030 if governments adopt sustainable development policies.
3. Nio is getting a bigger piece of a pie that's also growing
Nio and its manufacturing partner have an expansion project underway. Once they complete it this spring, the company will have the rated capacity to produce 250,000 EVs annually, and management has said that with overtime and other actions, it could push production to 300,000. That sets the company up to continue growing much as it has over the past two years.
| Q3 2019 | Q3 2020 | Q3 2021 | |
|---|---|---|---|
| Nio vehicle deliveries | 4,799 | 12,206 | 24,439 |
Data source: Nio financial releases.
Over the past two years, Nio's Q3 sales have risen at an annualized rate of more than 125%. But its current levels are still a drop in the bucket compared to what market demand would sustain.
There's plenty of competition in the EV sector. But Nio has added manufacturing capacity and is focusing on the two markets that are responsible for the most electric vehicle sales right now. Over time, investors could see plenty of appreciation in the stock if Nio executes well on its plans to grow sales in China, Europe, and beyond.
