We recently compiled a list of the 11 Small Cap EV Stocks to Invest In. In this article, we are going to take a look at where NIO Inc. (NYSE:NIO) stands against the other small-cap EV stocks.
An Overview of the Global Electric Vehicle Market
The global electric vehicle (EV) market continues to expand, driven by the need for sustainable transportation and advancements in technology.
According to the International Energy Agency (IEA), nearly 14 million electric cars were sold worldwide in 2023, marking a 35% increase from the previous year, with 95% of these sales occurring in China, Europe, and the United States. This surge brought the total number of electric vehicles on the road to 40 million. Electric cars represented about 18% of all car sales in 2023, up from 14% in 2022 and just 2% in 2018. The growth is primarily driven by battery electric vehicles, which made up 70% of the electric car stock in 2023. The electric vehicle market is expected to expand rapidly as consumer demand for cleaner transportation grows.
Electric car sales are expected to rise to about 17 million in 2024, which would be an increase of over 20% compared to 2023. Electric vehicles could make up more than 20% of all car sales in 2024. This forecast is supported by current trends, government policies, and the usual seasonal patterns seen in EV sales.
China remains the largest market for electric vehicles, accounting for nearly 60% of new electric car registrations in 2023. Europe follows with approximately 25%, and the United States accounts for around 10%.
There is significant potential for growth in emerging markets, where EV adoption is taking off. We could soon see a shift from early adopters to mass-market consumers. The introduction of new models and innovations, such as improved battery technologies and charging solutions, will play a crucial role in this transition.
Additionally, government policies and incentives continue to support the transition to electric mobility, further fueling demand. To compete with China in the EV market, the US is focusing on localizing its EV supply chain and increasing production capacity. Reuters reported on October 22 that US Energy Secretary Jennifer Granholm announced that the Department of Energy is quickly working to finalize $1.7 billion in grants aimed at converting automotive plants for electric vehicle production. This funding will help automakers change their existing facilities to make electric vehicles and their components.
With continued advancements, investments, and increasing acceptance among consumers, the future looks promising for the electric vehicles market.
Methodology
To compile our list of the 11 best small-cap EV stocks to invest in, we reviewed our own rankings and consulted various online resources to compile a list of the best small-cap EV stocks. Please note that we defined small-cap stocks as those with a market capitalization between $500 million and $10 billion.
From an initial pool of more than 20 small-cap EV stocks that met our criteria, we focused on the top 11 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 11 best small-cap EV stocks to invest in are ranked in ascending order based on the number of hedge funds holding stakes in them.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is NIO Inc. (NIO) The Best Small Cap EV Stock to Invest In?
A fleet of eco-friendly electric cars, a symbol of the company's commitment to sustainability.
NIO Inc. (NYSE:NIO) is a leading electric vehicle manufacturer based in Shanghai, China. The company focuses on designing and producing smart electric vehicles, offering premium models under the NIO brand and family-oriented options through the ONVO brand. NIO Inc. (NYSE:NIO) ranks among the best EV stocks to invest in.
In the third quarter of 2024, NIO Inc. (NYSE:NIO) achieved a quarterly record with 61,855 vehicle deliveries, marking an 11.6% increase compared to the same period last year. The NIO brand alone accounted for 61,023 deliveries, maintaining its status as the top-selling brand in China’s battery electric vehicle (BEV) segment priced above RMB 300,000, with a market share of 48%. The ONVO brand also made its debut by delivering its first model, the L60, on September 28, targeting the mainstream family market.
NIO Inc.’s (NYSE:NIO) financial performance is improving as well. The vehicle margin rose to 13.1% in Q3 2024, up from 11% in Q3 2023, reflecting better component costs and operational efficiencies. This trend indicates that NIO Inc. (NYSE:NIO) is not only increasing its sales but also enhancing profitability.
Looking ahead, NIO’s flagship model, the ET9, is set to begin production in March 2025. This vehicle is expected to reinforce NIO’s premium image and attract more customers. With plans to introduce new models and a focus on profitability, NIO Inc. (NYSE:NIO) is positioning itself for sustained growth. On the other hand, the ONVO L60 has gained popularity among families due to its spacious design and low energy consumption. This aligns with NIO Inc.’s (NYSE:NIO) strategy to diversify its offerings and capture a broader market share. The company’s strong market presence and innovative approach make it a promising stock for investors looking to benefit from the growing EV market.
Overall, NIO ranks 3rd on our list of the small-cap EV stocks to invest in. While we acknowledge the potential of NIO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NIO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
