Being productive

Arrival didn’t exactly cover itself in glory when it reported its most recent Q2 results. It disappointed on many fronts with more delays, which led to a huge sell off in its stock. Nonetheless, there were a couple of bright spots that are worth pointing out.

The first would be that the company saw yet another increase to its memorandum of understandings and orders, from 143k in Q1 to 149k in Q2. This now adds up to a total of approximately $6bn in potential revenue. But most importantly, it reaffirmed its commitment to start production this quarter. CEO Denis Sverdlov mentioned on the earnings call that the microfactory concept is coming to fruition, expressing his excitement and entrepreneurial spirit to radically change the traditional assembly line.

Yet another delayed Arrival

I’m afraid that’s about it for good news, unfortunately, as the rest of the report was mostly disappointing. Despite the firm confirming start of production in Q3, this is only for 20 vans, which is down from the initial 400 to 600 vans promised in the Q1 earnings report. This is because of cash preservation reasons, as well as the manufacturer only having enough parts for 200 vans currently. Arrival also doesn’t expect revenue to come in this year either due to the timing of these deliveries, which are expected to happen at the very end of the year.

To make matters worse, the company is having to dilute shareholders like myself once again. Sky-high inflation has forced the unicorn to seek additional capital. This is being done through an at-the-market (ATM) offering, worth $300m. Arrival plans to sell its shares into a secondary trading market, with $90m expected to be raised this year, and another $210m in 2023. The offering should give it enough cash until the end of 2023, with CFO John Wozniak guiding for it to finish 2023 with at least $300m in cash and equivalents.

That being said, it continued to burn through quite a substantial amount of cash in Q2. As such, it’s had to conduct some cost-cutting measures by putting its bus and car projects on pause until additional capital can be raised, while also cutting spending by 30%.

Lagging behind

Admittedly, Arrival has a great vision with wonderful economics, which was why I chose to invest in its stock. However, numerous delays and disappointments have only made me doubt whether this radical innovation can truly be executed.

With the company continuing to burn cash, profitability isn’t expected anytime soon. Although the board expects margins to reach breakeven by 2024, I can only imagine that it’s another empty promise after so many disappointments.

Arrival has had a terrible record of over promising and under delivering. So, I’m taking any future outlook with a big pinch of salt. Therefore, I don’t think the stock will be hitting $2 soon, and I won’t be adding to my position. Instead, I’ll be looking to purchase other stocks with better track records.

The post Will Arrival stock hit $2 anytime soon? appeared first on The Twelfth Magpie.

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John Choong has positions in Arrival. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Arrival

Arrival (NASDAQ: ARVL) can be easily dismissed as another electric vehicle company. However, what makes this growth stock unique is its approach to producing vehicles. Arrival aims to utilise its in-house technologies to produce rapidly scalable microfactories around the world.

With an estimated cost of $50m, these factories can be set up in a matter of months. Not to mention, they are also 24 times smaller than most other factories. This model allows each factory to achieve unprecedented growth, with an annual gross margin of $100m, producing 10,000 vans a year.

Nonetheless, Arrival now trades at a mere $1.44 after losing 95% of its value from its all-time high. This was the result of an overpriced valuation, delays, and share dilution. That being said, I think the stock is now fairly priced given that its market cap ($920m) is now lower than its total assets ($1.5bn).

After numerous delays, start of production for its vans is set to begin this quarter. This leaves me excited as a long-term investor. Provided that all goes according to plan, I think this growth stock could be a huge winner for years to come.

Astra Space

Astra Space (NASDAQ: ASTR) is a company targeting a niche portion of the space launch market. The firm offers to deliver payloads that are less than 300 kg to low earth orbit (LEO) while charging the most affordable fees.

The company has experienced unprecedented growth in its route to getting to space, as it’s the fastest space launch company to reach orbit. Its cheap method of producing rockets is what sets it apart from the competition. Even with a base launch cost of $2.5m, the Alameda-based firm is twice as cheap as its nearest competitor, Rocket Lab. This has allowed Astra to secure a backlog of over 50 launches with the likes of NASA, Spaceflight, Planet, and many others.

Having said that, Astra has also suffered a monumental drop in its share price of 80% this year. The current bear market hasn’t done growth stocks any favour either. Fears of a potential recession have soured investor sentiment and kept share prices low. Nevertheless, if Astra can manage to somehow deliver on its promises of daily launches by 2025, its current share price is going to be a steal.

Stunted growth?

Given the tremendous amount of potential from these growth stocks, are they a buy? Well, it’s important to note that while these companies have the potential to deliver a monumental return on investment, they can also fail.

I’m definitely intrigued by Arrival’s growth prospects. Even so, its cash position leaves me worried. With just $500m of cash, the unicorn has proposed restructuring its business. On the other hand, Astra has gone quiet since its most recent failed TROPICS launch. With no word from management as to what lies next for the company, I think there’s too much risk involved to buy more shares. As such, I’m holding onto both my Arrival and Astra positions for the time being.

The post These 2 growth stocks could be huge winners in the next decade and beyond appeared first on The Twelfth Magpie.

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John Choong owns shares of Arrival and Astra Space. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

2022 has seen the Tesla (NASDAQ: TSLA) share price falling nearly 40%. With ongoing supply chain issues derived from Covid-19, the firm has also seen rising pressure due to spiking inflation.

But despite these headwinds, last week saw the stock rebound by 10%. In fact, over the last month it has witnessed a 16% rise. So, after falling from its 52-week high of over $1,200, can it recover?

Tesla Q2 update

Earlier this month saw the release of Tesla’s Q2 production and delivery update. Within the period, the electric vehicle manufacturer produced over 258,000 vehicles, while it also managed to deliver over 254,000. This equated to a 27% increase year-on-year.

However, Q2 was the first time vehicle deliveries fell quarter-on-quarter in more than two years. The firm pinned this to “ongoing supply chain challenges and factory shutdowns,” as Tesla has struggled with production in recent months due to those Covid-19 restrictions hitting operations in China. Despite this, June 2022 was the highest vehicle-production month in the firm’s history.

Where next for Tesla?

So, where does the EV manufacturer go from here?

The slowing of production from Tesla falls in line with wider market struggles. Both the Nasdaq and S&P 500 have experienced large declines this year. And especially impacted have been growth stocks. This is because upward inflationary pressures tend to have the opposite effect on the price of these stocks. And as a result, the first half of this year has seen them come tumbling down. As investors tend to switch their money to ‘safer’ value stocks in volatile times, Tesla may continue to struggle in the near future.

Another issue I see with Tesla is its high valuation. For me, a price-to-earnings (P/E) ratio of 101 shows the stock is very overvalued. With this said, its P/E has been much higher in the past.

The business may also struggle with rising competition. There’s been a large push for a faster transition to electric vehicles in recent years. For example, in 2020 the UK government announced the sale of new petrol and diesel cars will end by 2030. And as such, I can see competition heating up in the EV space. This can already be seen with rivals such as Ford, which has pledged to be all-electric by 2030. While Tesla currently holds a dominant market position, this may slip in the future.

Despite this, I won’t write off the firm. It has taken massive strides to expand its manufacturing capacity. It recently unveiled its new Giga Texas plant. And at the same time, it has also set out plans to boost European sales with the opening of a gigafactory in Berlin. While this may cost Tesla in the short term, its ambitious expansion plans could help it retain its dominant position further down the road.

What I’m doing

The firm’s expansion should help it thrive in the long run. And its ambition has seen Tesla grow massively in recent times. However, I won’t be buying the shares today. I think macroeconomic pressures could see its price slip further. And with competition heating up, Tesla may see its role as industry leader slide.

The post The Tesla share price is rising. Here’s what I’m doing appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A little goes a long way

In the sea of electric vehicle companies, Arrival is still a small fish. But what makes the British unicorn so unique is its microfactory concept. Each factory can produce 10,000 vans. It is also estimated to have a low capital expenditure rate of £50m, while turning over £100m per year. This would cost much less than a traditional factory. Additionally, a microfactory only takes up 20,000 square metres. Pair this with its modular production method, and Arrival can quickly adapt to demand in an area, rent a small warehouse, and start production.

Nonetheless, this is still a concept and is yet to be proven. As such, I remain cautious. However, successful execution could very well alter the traditional assembly line that Henry Ford once pioneered, and change how vehicles are produced.

Much needed Arrival

Having achieved bus certification last month, the Nasdaq-listed firm could begin trials with one of its biggest customers, FirstGroup. Arrival also recently partnered with Enel X, a market leader in advanced energy solutions. The partnership will test Enel X’s advanced charging services on Arrival’s buses. A successful trial could results in additional orders to Arrival’s 143,000 letters of intent (LOI).

The success of these tests will be a key building block for Enel to include the Arrival Bus within its portfolio of global electrification solutions.

Source: Arrival Investor Relations

More importantly though, was the achievement of van certification this week. The van makes up 96% of the company’s current LOIs, so this was extremely good news. Consequently, Arrival shares exploded 15% on the news. This also puts the firm on track to start its van production in Q3. With 400 to 600 vans expected to be produced by the end of this year, this will bring in the company’s first batch of revenue.

Foggy road ahead

That being said, Arrival has an uncertain path ahead. While the Bicester-based company expects to finish the year with $150m to $250m of cash, it still won’t be sufficient to run its operations for 2023 and onwards. This worries me as an investor.

A stock offering is unlikely given its already low share price. Not to mention, dilution would potentially lead to its share price falling below $1, and getting delisted from the Nasdaq. Therefore, Arrival may have to take on debt, which will be costly in a high interest rate environment. This would also make its road towards profitability a much longer one, as future earnings would go towards repaying its debt.

Nevertheless, the average target price for the stock is currently $5.98, which presents a 350% upside! Although I doubt the share price will climb to such levels, I think there’s a decent chance the stock can grow by 100% if it sticks to its production guidance. This is why I’m currently holding a small position in Arrival shares.

The post Here’s how Arrival shares could double my money! appeared first on The Twelfth Magpie.

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Arrival (NASDAQ: ARVL) is an electric vehicle manufacturer that primarily produces lightweight commercial vehicles such as buses and vans. It plans to price its EVs the same as its petrol and diesel equivalents. With van production coming soon, I will be assessing whether to buy more shares in this EV growth stock for my portfolio.

Electrifying prospects

Arrival has created a standard electric vehicle platform that allows it to save costs. This is because the platform serves as the foundation for multiple vehicle categories such as buses, vans, and cars. This, paired with the EV manufacturer’s groundbreaking microfactory concept, makes its manufacturing process extremely efficient. Its microfactories have interchangeable cells, allowing for production of different vehicles, and up to 10,000 vans a year. Therefore, production can be executed on scale without the need for building massive factories.

Arrival has already secured orders from several companies such as UPS, LeasePlan, and FirstGroup. Its number of letter of intents (LOI) also saw a monumental increase to approximately 134k vehicles in its latest earnings report. This goes to show that the firm is gaining traction from renowned companies globally with plenty of tailwinds.

UPS and downs

Arrival’s biggest customer by far is UPS, which is also an investor in the business itself. The courier giant placed an order for 10,000 vehicles last year, with an option for a further 10,000. Management disclosed that it expects the start of production on its Arrival vans in Q3 this year. UPS also announced on its earnings call that it’s expecting 400 to 600 vans to be delivered by the end of the year. Nonetheless, the next hurdle the EV firm faces is getting its van certified. It expects this to be completed by Q2.

As a shareholder, I will admit that I am slightly worried. The expected production numbers this year are lacklustre to say the least. With the company continuing to burn cash without any revenue, 400 to 600 vans isn’t going to cut it. Although CFO John Wozniak mentioned that Arrival expects to end the year with $150m in cash, he also reiterated the firm’s intention to raise capital in the near future. This is to allow Arrival to scale production to meet its ever-increasing LOI numbers.

The Arrival share price is already sitting at penny stock levels, so any equity funding would be a waste at this price. As such, the company will most likely have to take on debt, which isn’t ideal in a high interest environment.

Delayed arrival

To add to my worries, Arrival is yet to announce the confirmation of its bus certification. This was expected to be completed by Q1. Additionally, the company has also postponed the release of its full financial results twice. These factors don’t bode well for its reputation. As a result, I am worried that Arrival may not even be able to hit its van production targets. Consequently, due to Arrival’s complacency, I will not be looking to buy more shares in this EV growth stock for my portfolio.

The post Could this EV growth stock be about to explode? appeared first on The Twelfth Magpie.

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John Choong owns shares of Arrival at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

So, will the electric vehicle (EV) manufacturer recover? And should I be buying some shares today? Let’s take a look.

Tesla share price history

Before looking at whether I would buy Tesla stock today, let’s start by looking at the recent history of the share price. At the outbreak of the Covid-19 pandemic, Tesla was changing hands for around $70. Yet by the end of the year, the shares had accelerated, rising an astronomical 725%, to nearly $720.

While this performance was not reciprocated in 2021, the tail end of the year saw the Tesla share price peak to its all-time high due to an agreement struck with rental company Hertz. The price then dipped again, however, closing the year at $1,056.

Should I buy?

So, does this present a buying opportunity for me? Well, there are a few factors I must consider before buying Tesla.

The main stumbling block for me is its high valuation. Tesla share currently trade on a price-to-earnings (P/E) ratio of around 165. Considering a good value P/E is deemed to be around or under 10, this shows just how overvalued the business currently is. A market correction could lead to a drop in the Tesla share price.

As well as this, the global rise in interest rates is having an adverse impact on growth stocks. Higher interest rates mean people can receive greater returns on their savings — and therefore, they are less likely to invest. In times like these, growth stocks are hit the hardest. This means if interest rates remain at their current level, or even rise further, we could see a continuation in the Tesla share price fall.

However, we will undoubtedly see a rise in demand for EVs in the future as more people make the transition to electric. And Tesla is in a strong position to capitalise on this given its major market share. This is seen through the demand for Tesla vehicles, which doesn’t seem to be slowing down. As my colleague Dan Appleby highlighted, the firm increased its deliveries of vehicles in 2021 to 936,172, representing an increase of 87% over 2020. Further, revenue grew 71% year on year. And it’s expected to grow by over 50% in 2022. From this, it’s clear to see how investors could be excited about Tesla.

Overall, as impressive as the figures posted by Tesla are, I find it hard to ignore the challenges the business faces. I think rising interest rates and the current economic uncertainty could lead to investors pulling money from volatile stocks. And I think the Tesla share price could take a hit. While the business also enjoys a large market share in the EV space, I deem its current valuation a big risk. Therefore, I’m not convinced it can recover quickly and I won’t be buying Tesla stock for now.

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NIO (NYSE: NIO) shares have had a bumpy ride over the past few months. In fact, just last week they fell over 16%, finishing the week at a little above $20. For context, this time last year they were trading around the $50 mark. Although the situation looks bleak, I do think there is some long-term value in NIO stock. However, would I buy it today? Let’s take a closer look.

Encouraging fundamentals

The primary reason I see value in NIO stock is its high growth. In its January delivery update, the firm announced it had delivered 9,652 vehicles, up 33.6% from the year before. What’s more, total deliveries for 2021 were up over 109% from 2020. The high growth that the firm has been able to sustain really fills me with confidence. If this trajectory is kept up, I think NIO will inevitably rise in the future.

NIO shares are currently trading with of a price-to-book (P/B) ratio of 9.6 and a price-to-sales (P/S) ratio of 6.8. For comparison, industry leader Tesla’s P/B ratio is 29 and its P/S is 17. To me this highlights the value of NIO at current, especially considering its high year-on-year growth. The firm is set to release its fourth-quarter results on March 7. If it contains more high growth metrics, I expect the shares to jump upward.

Headwinds for the shares

Perhaps the most pressing concern NIO is facing is the Russia-Ukraine conflict, and the uncertainty this has created across the globe. Events like this have a wide-reaching impact on investor sentiment and so produce volatile markets. This is the last thing the NIO share price needs right now.

The state of the broader macroeconomy also seems to be against it. Higher government spending coupled with supply shortages — both induced by the pandemic — have led to rising inflation around the globe. The way that central banks tackle this is by hiking their interest rates. As a general rule, when rates rise, stocks take a hit. High-growth stocks like NIO are often hit the hardest. Needless to say, this is bad news for the Chinese EV manufacturer.

A final risk I see for the shares is the heavily competitive EV landscape. Well-established firms such as General Motors and Ford have set aside billions in R&D for EV production over the next couple of years. In addition to this, competitors such as Li Auto and Xpeng more than doubled their sales in January, highlighting the high growth of NIO’s competition.

The Verdict

Overall, I think NIO shares do offer me the chance for long-term growth. However, there are some serious short-term headwinds the firm is yet to overcome. Although I have owned NIO shares for some time now, I would like to wait until at least the March results are released before considering adding more shares to my portfolio.

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Dylan Hood owns shares in NIO Inc. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In 2021, 6.4m electric cars were sold, which is 98% higher than in 2020. Global manufacturing powerhouses are stepping up battery production to keep up. And lithium prices are skyrocketing in China, where the demand is at an all-time high. The cost of battery-grade lithium is up over 20% since December and closing in on the US$40,000 per tonne mark. Does this demand mean that lithium shares will see exponential growth in 2022 as well?

The lithium market supply chain is not a straightforward one, where companies can simply increase supply to quell demand. Natural resources come with a multitude of governmental restrictions and lobbying which makes this tricky to call. Here I will look at the pros and cons of investing in lithium today and two UK lithium shares on my watchlist that could benefit.

Will the lithium demand cool down?

China controls a majority of the global lithium production and supply, which gives the nation a lot of pricing power. But the US and Europe recognise the need to establish other supply routes to prevent China from having a lithium monopoly. The Biden government released a National Blueprint for Lithium Batteries 2021-2030. This highlights ways in which the US can gain a competitive edge in the lithium market.

In fact, analysts are expecting a global lithium regulatory body in the coming years that will govern the global supply chain. All these developments could affect lithium prices in the future. But the estimates suggest that demand for lithium will remain high throughout 2022 given EV backorders and new model launches.  

But EV tech is growing fast, which means recycling methods and alternatives are not far behind. This puts lithium firmly in the price discovery phase right now. Also, a single mine can take 10 years to mature into expected production levels and seasoned analysts are unsure on how lithium supply can quickly grow to meet demand. The 548% jump in lithium carbonate price since 2020 could just be the start or a reactionary jump that could stabilise in the coming years.

EVs are here to stay

Despite making up just 4% of the automobile market in 2020, EVs have received governmental backing after COP 26 and engineers expect the tech to grow rapidly. And battery production has to match demand in the wider EV market.

What does this mean for UK lithium shares? Well, I think the growing demand for lithium as an opportunity for focused miners like Zinnwald Lithium. Its mining project in Germany has the capacity to produce and process 665,238 tonnes of lithium carbonate over 30 years. But mining efforts can be subject to strict regulations, highlighted by the Serbian government’s decision to revoke licenses from mining giant Rio Tinto’s $2.4bn lithium mine in the Jadar Valley.

This brings me to Ilika, a battery R&D company specialising in solid-state battery technology for a wide range of applications including EVs. This could replace liquid-based lithium batteries in EVs, which could improve battery recyclability. And the tech is widely applicable across multiple sectors.

But again, Ilika is still in its infancy and remains loss-making. The company raised £2m last year and could take two years to reach production. But the technology the company is working on could be very valuable, which is why its share price has jumped 322% since 2020. Both lithium shares could benefit from the demand, which is why I would consider a £1,000 investment if the EV market remains healthy. 

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Sadly, I’m not one of those shareholders, aside from my holding via Scottish Mortgage Investment Trust. Should I be taking a leap of faith and buying the shares myself?

Tesla stock: worth the risk?

There’s certainly no shortage of reasons for thinking the Tesla share price can continue ascending. The company has quickly become the poster child of the electric vehicle revolution. And thanks to the headlines generated by Cop26, our adoption of these cars may be even swifter than previously thought.

Despite past concerns, the company’s financial situation is clearly improving as well. Tesla’s latest Q3 update revealed a 57% rise in revenues to $13.8bn. Net income also hit $1.62bn — almost 400% higher than over the same period in 2020. 

Having said this, it’s also not hard to find reasons — both general and specific — for steering clear. 

Even though there’s no rule to say they can’t keep rising, US stock valuations are looking very frothy indeed. And with businesses across the globe struggling with supply chain disruption and higher costs, the risk/reward trade-off looks increasingly unfavourable for tech stocks in particular.

Musk’s behaviour also continues to raise eyebrows. Only today, it was confirmed that the visionary leader had sold $5bn of shares in his own company after conducting a poll on Twitter. This move has worried investors and helps to explain why Tesla stock has fallen 13% in value in the last five trading days.

Naturally, Musk won’t care. As a Fool with finite capital, I can’t afford to be so relaxed.

Better buy?

Of course, Tesla isn’t the only way of getting exposure to the automotive industry. Actually, I think online marketplace Auto Trader (LSE: AUTO) might offer a far more comfortable ride.

Today, the FTSE 100 member announced it had achieved its best-ever set of six-monthly revenue and profits figures. At £215.4m, the former was 82% above that achieved over the same period in 2020. It was also 15% above that logged in the year before the pandemic struck. Helped by record spending by retailers, operating profit soared 121% to £151.7m, with margin rebounding to a staggering 70%. 

While Tesla’s crown may slip eventually, I’d say AUTO’s ongoing dominance looks more assured. Today, it reported a 14% increase in ‘cross-platform minutes per month’ to 633 million. This represents over 75% of the whole market. Put another way, car buyers spend almost nine times more time on Auto Trader’s site compared to its nearest competitor. 

One for the traders

Taking all this into account, it’s perhaps no surprise that the AUTO share price soared over 11% in early trading, justifying my bullish call last month.

While this pales in comparison to Tesla’s recent performance, the fact that the £6bn-cap’s business model is based on recurring revenues lends it far better visibility, in my view. What’s more, the company’s ability to serve all vehicle buyers gives it a defensiveness that Musk’s company lacks.

Chuck in consistently high returns on capital and a bullet-proof balance sheet and I continue to regard AUTO as a great UK growth share. As superb as returns have been, I’ll leave Tesla stock to the traders. But I’d buy AUTO.

The post Tesla stock has soared. But is this FTSE 100 share now a better buy? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Scottish Mortgage Investment Trust. The Motley Fool UK has recommended Auto Trader. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The bull case for NIO 

Looking at the latest report from the firm shows me some encouraging numbers. Vehicle sales totalled $1.2bn for Q2 2021. This was up 6.8% from the previous quarter, and 127% compared to Q2 2020. The vehicle margin also increased over 10% since Q2 2020 which shows me the firm is expanding operations effectively. NIO is still a loss-making company, however, the net loss of $90m from Q2 this year being down 30% from the previous quarter and 50% from a year ago.

When I last covered the NIO share price in June, the firm’s results were similar. And the fact that the company is consistently expanding gives me confidence in its future growth. Moving forward, this consistency is what I think should make it stand out in the competitive EV market.

In May, it announced it would be expanding into the European market, starting with Norway. Charging equipment is currently being deployed as the firm’s ES8 SUV was approved for mass production across the continent. In addition to this, there are rumours that Germany will be the next expansion target, after a ‘General Manager of NIO Germany’ job was posted online. Its global design centre already operates out of Munich, so this seems feasible. If successful, I expect this expansion to be mirrored in a rising NIO share price.

The bear case for the stock 

The EV market is becoming fiercely competitive. Big names like Ford and General Motors have set aside billions of dollars for EV R&D over the next few years. Bigger firms with better margins and more established infrastructure will be hard to compete with and the company will have to fight to maintain any market share.

In addition to this, the global semiconductor shortage is still posing problems for the wider EV market. The shortage has already affected the firm, as it had to pause production between March and April this year, leading to a loss of 1,000 vehicles (around $60m). It must compete against much bigger firms to maintain chip supply if it wants to continue its strong growth.

I think the current NIO share price dip could be a buying opportunity. Although the firm does have challenges it must face moving forward, I feel it’s impossible to ignore the strong, consistent growth of the firm. As a current investor, I am monitoring the short-term movements and considering topping up my portfolio with additional shares.

The post Should I buy the NIO share price dip? appeared first on The Twelfth Magpie.

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Dylan Hood owns shares in NIO Inc. The Motley Fool UK owns shares of and has recommended NIO Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.