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NIO

June 16, 2024
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The Chinese name of NIO is Weilai, meaning Blue Sky Coming


Current share price: $10.19

Market Capitalisation: $17 billion

IPO Date: September 2018

 

NIO is often in the shadow of Tesla. Even though both companies are in the electric vehicle and autonomous driving industry, there are some key differences between them.

 

Since the introduction of the ES8 in 2017, all of NIOs smart electric vehicles have been equipped with battery swapping technologies, providing users with a chargeable, swappable, upgradable experience. In 2020, NIO launched the industry-first Battery as a Service, or BaaS, an innovative model which allows users to purchase electric vehicles and subscribe for the usage of batteries separately. BaaS enables users to benefit from lower vehicle purchase prices, flexible battery upgrade options and assurance of battery performance.

 

Battery swapping: Supported by over 1,200 patented technologies, all NIO vehicles support battery swapping. It provides users with convenient recharging experiences by simply swapping the user s battery for another one within minutes. The Power Swap station 2.0, which began deployment in April 2021, significantly increases service capacity by shortening the battery swapping time to under three minutes and carrying up to 13 batteries.

 

BaaS: Enabled by vehicle-battery separation and battery subscription, BaaS decouples the battery price from the purchase price of a vehicle and allows users to subscribe for battery usage separately. If users opt to purchase a NIO vehicle and subscribe for the battery under BaaS, they can enjoy a deduction off the original vehicle purchase price while paying a monthly subscription fee for the battery. NIO users are able to enjoy permanent or flexible upgrades to batteries with higher capacities or other future battery options with an additional fee as the battery technologies evolve.

 

THE POSITIVES

 

  1. Strong market potential: China is the world's largest automobile market, and the government is actively promoting the adoption of EVs to reduce air pollution. This presents a huge opportunity for NIO, which has positioned itself as a premium EV brand with a focus on innovation and design.
  2. Growing sales and revenue: NIO has been experiencing rapid growth in sales and revenue. In 2021, the company sold over 125,000 vehicles, up from just 20,000 in 2019. Its revenue also increased significantly in 2021, reaching over $8 billion.
  3. Strong brand image: NIO has established a strong brand image, particularly among younger Chinese consumers. The company has a unique design aesthetic and a strong social media presence, which has helped it to build a loyal fan base.
  4. Innovation and technology: NIO is focused on innovation and technology, with a particular emphasis on battery technology and autonomous driving. The company has been investing heavily in R&D, and has developed several cutting-edge technologies that have helped it to differentiate itself from its competitors.
  5. Partnership with state-owned entities: NIO has formed partnerships with several state-owned entities, which gives it access to a wide range of resources and expertise. For example, NIO has partnered with the city of Hefei to establish a manufacturing base and research center, which has helped to support its growth.

 

THE RISKS

 

  1. Regulatory risks: NIO is a Chinese company and operates in a heavily regulated environment. Any changes to the regulations or policies related to the EV industry or the automotive sector as a whole in China could have a significant impact on the company's operations, financials, and growth prospects.
  2. Intense competition: The EV market in China is highly competitive, with both domestic and foreign players vying for market share. NIO faces competition from other domestic EV manufacturers such as BYD, Li Auto, and XPeng, as well as foreign players such as Tesla, which has a significant presence in China.
  3. Supply chain disruptions: NIO's operations rely on a complex global supply chain, which can be vulnerable to disruptions, especially during times of crisis, such as the COVID-19 pandemic. Any disruptions in the supply chain could lead to production delays, increased costs, and reduced revenue.
  4. Dependence on key suppliers: NIO relies on a small number of key suppliers for certain components and materials, which can expose the company to supply chain risks. For example, the company relies on CATL, a Chinese battery manufacturer, for its battery supply. Any disruption to the relationship with key suppliers could impact NIO's production and growth.
  5. Financial risks: As a relatively new and fast-growing company, NIO faces financial risks associated with high capital expenditures, debt, and cash burn. The company has been operating at a loss, and its profitability is uncertain. Any significant financial challenges could lead to a decline in the company's stock price.

 

FINANCIAL STATEMENT SUMMARY

 

NIO has not released their FY2022 results to the market yet. I compared them to Tesla and XPeng for FY2021 in the attached image. NIO & XPeng are loss-making and spending large amounts on Research & Development. They are however growing faster than Tesla with fairer valuations.

 

Disclosure: I own shares in NIO at time of writing. Still building my position on pullbacks in the share price

 

Disclaimer: Nothing in this article should be seen as financial advice. Everything stated is for educational purposes only. Always do your own due diligence.

 

 

 

 


 


 


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