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Deep Dive: How to value Nio’s stock compared to Tesla, VW, Ford and other rivals

Corrected to show Tesla delivered 201,304 vehicles during the second quarter.

Chinese electric-vehicle maker Nio Inc., which sells no cars in the U.S., has a market capitalization of $60.2 billion. By that measure, it is larger than Ford Motor Co., which was founded in 1903.

That might make sense to you as an investor — after all, Nio is an innovative company that sells only electric vehicles. Ford is a legacy auto maker that is working to catch up and eventually make a full transition to electric vehicles. Shares of Nio have more than tripled in the past year, while Ford’s have almost doubled after cratering in the previous decade.

So where does Nio
NIO,
which reported second-quarter results after the stock market closes Wednesday, fit in an investment thesis? Below are screens showing how its stock valuation compares to vehicle production, and how that valuation relates to projected earnings through 2025.

Read: Nio shares rise after narrower quarterly loss for Chinese EV maker

Doubling car production

For the second quarter, Nio delivered 21,896 vehicles for a 112% increase from a year earlier. The growth is impressive, but the total number of vehicles sold is still relatively small.

Here’s a look at the 10 largest auto makers by market capitalization, along with their second-quarter sales or delivery numbers (whichever was higher, if both were reported) and additional color below the table:

Company Market capitalization ($ millions) Total vehicles sold or delivered – second quarter, 2021
Tesla Inc.
TSLA
$702,901 201,304
Toyota Motor Corp.
TM

JP:7203

$293,507 2,545,000
Volkswagen AG
VWAGY

XE:VOW

$102,919 2,546,000
Daimler AG
DMLRY

XE:DAI

$93,333 736,400
General Motors Co.
GM
$78,771 1,757,000
Stellantis N.V.
STLA
$66,039 1,655,400
Nio Inc. ADR Class A
NIO
$60,215 21,896
Honda Motor Co. Ltd
HMC

JP:7267

$59,415 998,000
Bayerische Motoren Werke AG
BMWYY

XE:BMW

$57,973 778,504
Ford Motor Co.
F
$54,228 764,000
Source: FactSet

Click on the tickers for more about each company.

You can see that those valuations are about the future, when innovators in the EV space — Tesla Inc.
TSLA
and Nio, on this list — may (or may not) become as large as legacy players.

For now, Ford
F
churns out mostly internal combustion engine (ICE) vehicles at nearly 35 times the rate that Nio makes EVs.

One thing to be aware of is that the legacy auto makers don’t all report their unit sales the same way. Most don’t break out electric vehicle sales.

Among those that do, definitions vary. For example, Toyota Motor Corp.
TM

JP:7203
reported that “electrified vehicle” sales made up 26.6% of total auto sales during the second quarter. But that category includes:

  • HEV – hybrid EVs that are not plug-ins.
  • PHEV – plug-in electric vehicles.
  • BEV – battery electric vehicles.
  • FCEV – fuel-cell electric vehicles.

For Toyota, BEV made up only 0.2% of second-quarter sales, while they accounted for 100% of sales for Nio and Tesla. Toyota’s PHEV sales made up 1.4% of the total.

Volkswagen AG
VWAGY

XE:VOW
reports electric-vehicle sales as including PHEV, which accounted for 6.7% of second-quarter sales, or BEV, which made up 4.4% of total sales. Those are impressive numbers: a combined 11.1%.

For Bayerische Motoren Werke Aktiengesellschaft
BMWYY

XE:BMW,
better known as BWM Group, a second-quarter breakdown of electric-vehicle deliveries isn’t yet available, but for the first half of 2021, 153,243 all-electric or plug-in hybrid vehicles were delivered, or 11.4% of total deliveries.

Valuation to earnings estimates

For companies at early stages, comparisons of price-to-earnings ratios may not mean very much. Such companies are focusing on growth rather than profits. An example of this has been Amazon.com Inc.
AMZN,
which has traded at a high P/E for decades as it has worked to expand into new lines of business, at the expense of the bottom line.

A high P/E ratio can reflect investors’ enthusiasm for innovation and in the case of EVs, a political consensus for transforming the industry. So Nio and Tesla trade at much higher P/E ratios than the legacy auto makers.

Then again, very low P/E may show too much contempt among investors for the older manufacturers, as they use their cash flow from continuing massive sales of traditional vehicles to fund their development of EVs. Opportunities may be highlighted.

Normally a forward P/E ratio is calculated by dividing the share price by a rolling consensus estimate of earnings per share for 12 months. This isn’t available for all the companies listed here, so we’re using consensus estimates for net income for calendar 2022.

First, here are P/E ratios based on current market caps and consensus 2022 estimates among analysts polled by FactSet. The table includes the annual estimates going out to 2025, and also a P/E based on current market caps and the 2025 estimates:

Company Price/ est. 2022 earnings Price/ est. 2025 earnings Est. net income – 2021 Est. net income – 2022 Est. net income – 2023 Est net income – 2024 Est. net income – 2025
Tesla Inc. 83.8 50.5 $5,963 $8,384 $10,609 $11,282 $13,930
Toyota Motor Corp. 11.5 9.0 $23,321 $25,620 $27,204 $30,603 $32,714
Volkswagen AG 5.4 4.3 $16,902 $18,918 $20,656 $23,042 $24,025
Daimler AG 6.6 6.3 $14,063 $14,196 $14,744 $15,567 $14,931
General Motors Co. 7.6 6.1 $9,487 $10,354 $10,240 $12,316 $12,865
Stellantis N.V. 4.9 4.0 $12,421 $13,363 $14,642 $17,013 $16,525
Nio Inc. N/A 37.7 -$1,019 -$56 $382 $727 $1,596
Honda Motor Co. Ltd. 8.5 7.4 $6,211 $7,014 $7,567 $7,702 $8,079
Bayerische Motoren Werke AG 5.6 4.8 $11,287 $10,344 $10,669 $11,508 $12,183
Ford Motor Co. 7.1 5.5 $6,300 $7,668 $8,299 $9,666 $9,864
Source: FactSet

Nio is expected to become profitable in 2023. Looking out to 2024, its forward P/E is lower than that of Tesla. To put the forward P/E valuations in perspective, the S&P 500 Index
SPX
trades for a weighted 20.5 times consensus 2022 EPS estimates.

Valuation to sales

Forward price-to-sales estimates might be more useful for early-stage companies that are showing low profits or net losses. Then again, the same distortions apply: Investors love the pure-play EV makers now, and may be paying too much for them when you consider that shares of Nio have more than tripled over the past year, while Tesla’s stock has risen 150%.

Here’s a similar set of data driving price-to-sale ratios, again using current market caps (in the first table at the top of this article) and consensus full-calendar-year estimates in millions of U.S. dollars:

Company Price/ est. 2022 sales Price/ est. 2025 sales Est. sales – 2021 Est. sales – 2022 Est. sales – 2023 Est. sales – 2024 Est. sales – 2025
Tesla Inc. 14.0 6.0 $50,043 $67,624 $82,515 $100,867 $118,119
Toyota Motor Corp. 1.1 0.9 $274,918 $294,507 $303,894 $313,997 $320,603
Volkswagen AG 0.3 0.3 $296,465 $313,887 $325,729 $347,833 $349,813
Daimler AG 0.5 0.4 $201,180 $213,412 $219,048 $221,998 $209,239
General Motors Co. 0.6 0.5 $136,113 $156,867 $155,167 $163,637 $171,301
Stellantis N.V. 0.4 0.3 $184,595 $200,063 $207,542 $223,725 $229,321
Nio Inc. 11.0 2.6 $5,471 $9,076 $13,084 $16,889 $23,011
Honda Motor Co. Ltd. 0.4 0.4 $134,509 $146,000 $149,629 $149,277 $148,827
Bayerische Motoren Werke AG 0.4 0.3 $130,883 $141,358 $145,773 $151,385 $171,524
Ford Motor Co. 0.4 N/A $139,171 $167,433 $173,633 N/A N/A

For reference, the S&P 500 trades for 2.7 times its consensus 2022 sales estimate.

Analysts’ opinions

Here’s a summary of opinion of the 10 auto makers among analysts polled by FactSet. For companies with primary listings outside the U.S., the local tickers are used. All share prices and targets are in local currencies:

Company Share “buy” ratings Closing price – Aug. 11 Consensus price target Implied 12-month upside potential
Tesla Inc.
TSLA
44% 707.82 694.96 -2%
Toyota Motor Corp. 
JP:7203
64% 9,973.00 11,110.53 11%
Volkswagen AG
XE:VOW
80% 299.40 278.90 -7%
Daimler AG
XE:DAI
74% 74.88 95.73 28%
General Motors Co.
GM
88% 54.27 72.75 34%
Stellantis N.V.
STLA
88% 21.32 27.30 28%
NIO Inc. ADR Class A
NIO
93% 43.98 61.12 39%
Honda Motor Co. Ltd.
JP:7267
79% 3,649.00 4,203.13 15%
Bayerische Motoren Werke AG
XE:BMW
42% 82.29 102.73 25%
Ford Motor Co.
F
57% 13.95 16.08 15%
Source: FactSet

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