NIO stock alert: Nio gets green light for autonomous driving tests in China

A future with self-driving cars is fast approaching – and it could arrive in China first. In fact, the country has put several Chinese automakers on a list of companies that have permission to “road test vehicles with Level 3/4 autonomous driving capabilities.” That list includes electric vehicle (EV) manufacturers Nio (NYSE:NIO), whose shares have mostly shown a downward trend over the past six months.

That potential catalyst hasn’t done much for NIO stock so far today. Still, the news could boost the stock price once the company starts testing autonomous vehicles on public roads. That’s if other companies don’t beat Nio to it, of course. Getting to market first is key, and several of the electric carmaker’s stronger competitors are also looking to usher in a driverless future.

What is happening with NIO shares?

There is almost no doubt that the next phase of the transportation world will be autonomous driving. Tesla (NASDAQ:TSL) has worked hard to perfect this technology, but not without significant setbacks. Now China is paving the way for some of its domestic automakers to put their autonomous vehicles on the road. According to EVThe nine companies will “conduct tests on public roads as part of China’s strategy to accelerate the adoption of self-driving cars and improve the integration of intelligent connected vehicle systems into road infrastructure.”

NIO shares are currently down 1%, despite having been mostly up last week. However, some of Nio’s competitors are doing better. The Chinese market leader for electric vehicles BYD (OTCQB:BYDD) is also on China’s driverless vehicle list and is in the green today after reporting strong delivery growth for May 2024.

While Nio also just reported impressive delivery numbers for May, showing significant year-over-year (YOY) growth, NIO stock is still down today while BYDDY stock is up, suggesting the company is facing some major challenges. While Nio is working hard to make up lost ground, the market seems skeptical.

Along the road

Despite all the challenges NIO stock has faced over the past year, it has managed to stay in the game. In fact, the stock has mostly outperformed riskier EV stocks like Mullen Automobiles (NASDAQ:MUL) And Fisherman (OTCQB:FSRN). But even though Nio reported strong deliveries and secured an outside investment for its power unit, shares have struggled to stay above the $5 mark.

Now Nio has a chance to show investors that they shouldn’t write the company off. If the electric vehicle company can show real progress in autonomous driving testing, Nio has a chance to leapfrog the competition. But to do so, it will have to beat a much bigger rival – and BYD has both the size and the resources to take on anyone. After all, the auto market leader has repeatedly beaten Tesla at its own game in China. Nio has a formidable opponent and its chances are not good.

At the time of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.