News & analysis
News & analysis

Bump in the road for EV makers

1 January 2020 By Klavs Valters


It was a monumental year for two of the biggest electric car makers – Tesla and NIO in 2020. The stocks of both companies rose significantly over the last 12 months with NIO gaining over 1000% and Tesla by over 350% – reaching new record highs.

With such gains, both companies have attracted significant public interest and a lot of investors have been keeping a close eye on both of the company’s progress. But recently, we have seen a bump in the road for both companies with the share price of NIO, Tesla, and other electric car makers dropping, causing concern for the investors.

But should this be a concern or an opportunity for investors? I think there would be two sides, but I guess most investors would look at it as an opportunity, seeing that the share price has dropped despite the future prospects for both companies. There were a lot of doubters for Tesla in its early days when Elon Musk’s company was burning through cash each day, but that hasn’t stopped the company evolve into what it is today and at one point making Musk the richest person in the world.

Also – the future of the world is green. A lot of countries around the world have already banned the sale of new diesel and petrol cars from 2030 onwards. However, I think the world is still some way away from being ready for most people to own an electric car, especially from the infrastructure perspective.

Most people would probably think that you will need to charge your electric car at a charging station (or at home) and wait hours for it to be done – which in some cases will probably be true. However, the infrastructure for electric cars must be more advanced than that. We live in a world where we expect everything straight away and the same will happen with charging electric cars – that is why we are seeing companies working on battery swap stations which will make the process quick and easy. The battery in electric cars has long-range and will probably increase over time. For example, NIO’s model ET7 has a battery range of around 621 miles (around 1,000 km). This means you could drive from London to Paris and back with the same battery charge (the quickest route from London to Paris is 292.3 miles according to Google Maps).

But with all the positives, there are and will be challenges for the electric car manufacturers. This week NIO announced that the global chip shortage will have an impact on their car production in the second quarter of the year. They highlighted that the shortage of semiconductors and batteries will mean that the company will have to cut its production capacity from 10,000 to 7,500 vehicles.

The share price of NIO have fallen by over 25% in the last month, trading at around $42 per share. Tesla shares have also seen a drop in the last month, down by 20% – trading at $677 per share.

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