Just over a year ago, Chinese electric carmaker Nio Inc. was on the brink of collapse as its finances struggled as the demand for electric vehicles continued to decline. Now, the company's stock prices have surged by more than 1,000%, pushing its market valuation well above more-established companies such as General Motors.
At the start of the year, Nio's stock was trading at around $3.72 per share. So far, the stock has hit a 52-week high of $49.35 per share. It closed at $48.30 per share Thursday.
Nio's rise is the perfect illustration of the rapid shift in consumer and investor perceptions towards electric vehicles. The past years have seen dwindling skepticism over the viability of the technology as more people adapt to the cleaner mode of transportation.
Along with its main rival Tesla, Nio's market valuation has grown substantially over the past few months, seemingly thriving amid the growing competition. However, skeptics of the company's rapid growth have said that success is still far from guaranteed.
Compared to its more-established rivals, Nio's sales volume is minuscule. The company is however slowly catching up. Last month, Nio's monthly sales breached the 5,000-mark for the first time. In comparison, Tesla's monthly estimated sales are hovering around 11,000 to 12,000 units.
The company has also not yet turned a profit and costs relating to its research and development are continually rising. Fundamentally, the prospects of the stock's ability to remain elevated are questionable.
"Another wave of price cuts for premium electric vehicles in China may be on the horizon, stirring up what could be an intense rivalry," Bloomberg analysts Steve Man said in his report.
Despite the plethora of challenges the company is expected to face, Nio remains positive about its business plan. The company has also not faltered from its decision to price its products at a premium. Compared to Tesla's products, Nio's vehicles are much more expensive. Its Nio ES6 SUV, for example, is priced 30% higher than its Tesla counterpart.
What really separates Nio apart from the rest is its commitment to providing innovative ownership solutions to consumers. The company's leasing and upgrade programs have been great successes and its battery-swapping stations have proven to be effective in eliminating "range anxiety" amongst new buyers.