China-based electric vehicle manufacturer Nio (NYSE:NIO) is looking to broaden its scope. However, prospective NIO stock investors should view Nio’s expansion plans with a critical eye.
The company’s venture into battery-swapping technology and other fields will require time and capital (both financial and human). In the end, the results might disappoint overeager shareholders.
Nio is already working hard to establish itself as an EV maker in a highly competitive industry. The automaker plans to expand its market footprint in China as well as internationally.
Yet, Nio’s investors should prepare for share-price volatility as the company could experience growing pains this year. Expansion plans can be hit-or-miss, and it’s probably better to adopt a wait-and-see policy instead of jumping headfirst into a trade.
Nio Tries Its Hand at Battery Swapping Tech
Remember, Nio’s track record isn’t perfect when it comes to expanding into different fields. For instance, Nio closed its insurance brokerage subsidiary company because of regulatory problems.
Also, the company’s attempt to commercialize a smartphone called the NIO Phone seems to be going nowhere fast.
Nio should probably stay in its lane. Nevertheless, the company is aggressively venturing into a relatively new and untested market: the battery swapping stations.
Nio set a goal of establishing 2,300 battery swapping stations by the end of this year. It will undoubtedly be a capital and labor intensive operation.
Perhaps Nio ought to be saving money instead of spending it on new projects, as the company sustained a $838.9 million net earnings loss during 2022’s fourth quarter.
How Could This Affect NIO Stock?
Nio seems to want to do many things at the same time. The company recently entered into a five-year partnership with Wencan Group, a supplier of one-piece die-casting parts. On top of that, Nio disclosed a collaboration with energy technology company Tibber, which provides an energy usage tracking app.
It’s possible that Nio’s management believes “more” is the same as “better,” but that’s not always true. You may have noticed that many large, successful companies are reducing their operations and expenditures this year.
Nio should consider focusing on what the company has already poured a great deal of capital and man-hours into: producing EVs that will resonate with the public.
The company declared that it “will speed up the expansion of the battery swapping network” this year, but this might or might not have the desired outcome. Thus, as a cautious investor, you can choose to monitor the situation and revisit NIO stock at a later date.
Ambitious Expansion Plans and NIO Stock
Nio’s management has a serious choice to make. They can continue to test out new ventures and collaborations, but the results will be uncertain.
Or, they can focus less on expansion plans, and instead stick to Nio’s core business of manufacturing EVs in a super-competitive market. Frankly, the company’s deep-dive into battery swapping stations might not boost NIO stock. Therefore, it’s wise to stay on the sidelines and watch Nio’s progress – or lack thereof – from a safe distance.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.