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business

NIO Stock has a huge catalyst in 2023


Source: Robert Way / Shutterstock.com

Nio (NYSE:NIO) stock continues to rise as investors applaud China’s moves to end Covid-19 lockdowns and boost exports. The title also benefits from the rise of the Chinese yuan against the US dollar.

Nio opened on December 9 at $13.25. A month ago, it was trading at $9.58. At the start of 2022, it was trading above $30. The market capitalization is now around $22.5 billion with an estimated revenue of $6.5 billion in 2022. The yuan is now trading at 6.94 to the dollar, after trading at 7.24 a month ago.

Exports on the rise

Nio stands out from other electric car manufacturers with its battery exchange stations. The company claims it can change a battery in just half an hour, maintaining the range of its cars and generating additional revenue.

Nio is also ahead of most Chinese EV makers in exporting to Europe. She started renting her cars in Germany last October. It has now agreed to install 20 battery swap stations at charging parks owned by a German power utility. It plans to have 120 such stations in Europe by the end of next year.

Battery swaps help Nio compete at the high end of the EV market against You’re here (NASDAQ:TSLA), Geely’s (OTCMKTS:GELYF) The North Star (NASDAQ:PSNYW), and other premium brands. Trading is expensive and capital-intensive, but Tesla’s supercharging stations have done that too, helping it dominate the market, even in China.

Chinese stocks and the country’s currency have risen since the government began responding to consumer demands to lift Covid-19 restrictions that were causing economic damage. The moves came after President Xi Jinping won a third five-year term alongside a loyal team and after authorities cracked down on protests.

The move in the yuan should particularly benefit car exporters like Nio, as it makes their sales more valuable when translated into dollars. The 4% movement in the currency goes directly to the bottom line of the exporter. At the height of the pandemic, the yuan was trading as low as 6.32 to the dollar.

NIO action: what happens next?

It is almost always true that an investment in a Chinese stock is an investment in the Chinese government. If China lets its economy loose, companies like Nio should have a smoother ride.

As of the date of publication, Dana Blankenhorn does not hold any positions at the companies mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

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