NIO Stock Review

NIO is an EV carmaker from China. The stock which was trading at $1.50 earlier this year is now at $54.  In case you’re wondering, that’s more than 40X gains in less than a year. 

To begin with, NIO’s brand and referral network are extremely strong in China.

Even though Tesla is the #1 automaker in the world (in terms of market cap) with 80%+ market share (EV market share), NIO is following similar steps, at least in terms of growth-wise. 

However, there is a considerable difference when it comes to technology and battery charging. 

For Instance, NIO uses swappable battery stations, whereas Tesla is busy building supercharging networks all around the world. 

While NIO cars are only available in China at the moment, Tesla’s brand is spread all across the globe with factories being built in Berlin and China (outside the US). 

Also, Tesla’s self-driving/autopilot technology is being in-house whereas NIO’s LIDAR uses Intel’s Mobile Eye Technology. 

NIO’s Recent Quarter Earnings

NIO released its 3rd quarter results recently and again beat Wall Street’s expectations.

The balance sheet now shows plenty of cash balance in its hands. 

Below: NIO’s Stock trading at $54 now, which’s more than 10X from the start of this year alone. 

Quick highlights of the recent quarterly earnings report by NIO: 

• Total Quarterly Revenues reached RMB 4,526.0 Million (US $666.6 million) 

• The Quarterly deliveries of ES8, ES6 and EC6 were 12,206 vehicles

• Quarterly Vehicle Margin reached 14.5% which is extremely good, considering that NIO is only 6 years old (while Tesla has been around for almost 16 years to drive profitability)

• NIO’s Quarterly Gross Margin reached 12.9%

• NIO’s net loss was RMB 1,047.0 million (US $154.2 million) in the third quarter of 2020, representing a decrease of 58.5% from the third quarter of 2019 and a decrease of 11.0% from the second quarter of 2020.

• Excluding share-based compensation expenses, adjusted net loss (non-GAAP) was RMB 997.8 million (US $147.0 million) in the third quarter of 2020, representing a decrease of 59.3% from the third quarter of 2019 and a decrease of 11.8% from the second quarter of 2020.

• Basic and diluted net loss per American Depositary Share (ADS) were both RMB 0.98 (US$0.14) in the third quarter of 2020. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted basic and diluted net loss per ADS (non-GAAP) were both RMB 0.82 (US$0.12).

• Cash and cash equivalents, restricted cash and short-term investment were RMB22.2 billion (US$3.3 billion) as of September 30, 2020.

You can view the complete earnings report by clicking here.

NIO’s Future Forecasts (4th Quarter and Beyond)

NIO’s delivery expectation for quarter 4 is 16500 -17000. This represents an increase of approximately 100.6% to 106.7% from the same quarter of 2019 and an increase of approximately 35.2% to 39.3% from the third quarter of 2020.

CFO Steven Wei Fang said that auto investors should expect NIO to deliver between 16,500 and 17,000 vehicles in the fourth quarter, generating revenue of $922 million to $948 million.

• NIO ES8, ES6, EC6 are in mass production and top the charts in terms of sales

• 2 Sedans coming soon and currently in the pipeline (Mostly expected to be unveiled on Jan 9th on the NIO day). Remember, Tesla’s Model 3 (also a sedan, which is the best seller for them). NIO currently does not have a sedan in the market. So, this can be a huge growth driver for the company

• NIO can generate extra revenue by selling the Governments Regulatory Carbon Credits (That’s what Tesla does too)

• Europe expansion next year (Q2, 2021) starting with Denmark and Norway

• NIO recently released the 100kWh battery pack with a range over 510km or 317 miles

• NIO’s soon to be released 150kWh battery pack with 900km or 559 miles

• NIO’s battery swap technology 2.0 is a game-changer which swaps your battery pack in less than 3 minutes

• BAAS (Battery-as-a-service) strategy and its impacts on the bottom line (subscriber-based revenue).

• What BAAS does is pretty simple, the upfront cost of owning the vehicle reduces substantially, instead you can opt for the monthly plan (depending on the battery size you want).

• The beauty of all this is, the main driver of EV cars are their batteries, so through BAAS, you can upgrade, change or replace your car’s battery whenever you want. It makes purchasing a car much more affordable.

What Is NIO’s LiDAR Autonomous Driving?

Advantages of LiDAR:

1. Far more accurate than camera-based mapping. It can detect the direction of a pedestrian facing & hand signals of a cyclist to predict the next move.

2. They are NOT fooled by shadows, bright sunlight on the camera, headlights of other cars and other environmental conditions that could affect a camera-based system.

3. Requires less computing power.

4. By using complex algorithms system can identify raindrops and snowflakes etc according to Ford.

Below is the video from the YouTube channel “Wagner Saucedo” which I found is pretty good, covering NIO’s stock. 

Advantage of a LiDAR Camera

1. Identifying road signs. However, this will have less benefit as car navigation systems and real-time traffic systems incorporate those details as part of a car’s navigation systems. In some places, traffic lights communicate with cars to provide improved braking and acceleration.

Therefore the use of LiDAR with cameras will have far better results than pure camera-based systems in my opinion. Most of the German brands have started using LiDAR in their flagship models.

• A massively positive catalyst for NIO is that China is the world’s largest EV market by far and 4 times that of the U.S.

• The Chinese govt (MIIT) mandated that 25% of all car sales in the country be EVs by 2025.

• A huge future revenue driver that analysts have not factored in is NIO Robo-Taxi which it plans to launch in 2022 with Intel Mobileye or NIO’s internally designed chip.

• Robo-Taxi is projected to reach USD 29.08 Billion by 2027, growing at a CAGR of 61.88% from 2020 to 2027

• Another huge revenue driver that analysts also did not account for is NIO’s newly formed battery asset management company

• The EV battery market is projected to reach USD $133.46 Billion by 2027 at a CAGR of 18.05% from 2020 to 2027.

Final Thoughts 

So, Is NIO a buy at these levels? The stock is currently trading at almost $55 per share. 

If you ask me, I would definitely recommend buying the stock at these levels. NIO stock might have 10X this year alone, however, the company is just starting, with 2 Sedans yet to be launched. 

Also, the news is that NIO will be increasing the monthly vehicle production count to around 7,500 per month starting January. And that makes complete sense right. With 2 Sedans on the way and the already hit premium SUVs, these numbers are only meant to grow in the future. 

The only caveat here is, as per me, will NIO will able to grow outside of the Chinese market? Even in the Chinese market, there are around 500 EV companies including XPENG, BYD and Tesla. But, I think NIO will definitely continue to grow in the next 5-10 years at least. 

Thanks for reading, let me know your thoughts and comments below. 

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