NIO's High Flying Debut Will Crash Soon

Sep. 17, 2018 2:32 PM ETNIO Inc. (NIO)TSLA65 Comments
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  • NIO is flying high after its recent debut in the US market.
  • While investors compare the company to Tesla, many aren't paying attention to the painful similarities between the two.
  • With ambitious production targets, the company has set the stage for failure early on.
  • Financially, things look no better, as the company burns through massive amounts of cash and will likely need to access funds in the near-to-mid-term.
  • In my view, the stock is going to crash relatively soon.

NIO (NYSE:NIO) is making waves in the market after going public just a few trading sessions ago. On Thursday, September 13, 2018, the stock climbed from $6.60 per share to $11.60 per share as more and more mainstream outlets compared the company to Tesla (TSLA), hyping up excitement around the stock.

However, in case you haven't been following Tesla, a comparison to the company isn't always the best thing. The truth of the matter is that these two companies may be too similar, including similarities in overly-ambitious production targets and the potential need to access capital through a potentially dilutive transaction within the next couple of years.

With massive spending and production-related disappointments likely ahead, I believe that NIO shares are headed for declines ahead.

The NIO/Tesla Comparison Is Uncanny

NIO is, in a nutshell, the Tesla of China. The company's claim to fame is the production of high-end electric vehicles. Here are a few brutally obvious similarities between the two:

  • Electronic Vehicles - Both NIO and Tesla are manufacturers of electric vehicles.

  • Expensive Vehicles - Tesla's vehicles are, for the most part, very expensive, many of which have price tags in the six figure range. Although NIO does offer vehicles at a steep discount relative to Tesla's prices (in general), its vehicles are pretty expensive as well. The company recently announced the price of its first production vehicle, the ES8, which will come with a price tag of $67,765. While many are comparing this to Tesla's six figure Model X, they fail to mention Tesla's Model 3, which has a price tag of just under $50,000. Irregardless, both car makers offer higher-end vehicles that are, at minimum, about twice the average cost of a new vehicles.

  • Investor Hype - Tesla is one of the most talked about stocks on the

This article was written by

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I am an active investor who enjoys finding the hidden gems in the market. When not investing, writing about investing, or working in one way or another, I love to spend time with my family out on the water!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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