NIO is a Chinese automobile manufacturer. The stock which was trading at $1.50 earlier this year is now trading at $54. In case you’re wondering, that’s over 40x earnings in less than a year.
For starters, NIO’s brand and SEO network are extremely strong in China.
Even though Tesla is the world’s #1 automaker (by market capitalization) with over 80% market share (electric vehicle market share), NIO is following similar steps, at least in terms of growth.
However, there is a considerable difference in terms of technology and battery charging.
For example, NIO uses swappable battery stations, while Tesla is building supercharging networks all over the world.
While NIO cars are only available in China at the moment, the Tesla brand is widespread around the world with factories under construction in Berlin and China (outside the US).
Additionally, Tesla’s self-driving/autopilot technology is developed in-house, while NIO’s LIDAR uses Intel’s Mobile Eye technology.
NIO’s Recent Quarterly Results
NIO recently released its Q3 results and once again exceeded Wall Street’s expectations.
The balance sheet now shows a large amount of cash on hand.
Below: NIO shares are currently trading at $54, up more than 10 times since the beginning of this year alone.
Highlights from NIO’s recent quarterly earnings report:
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Total quarterly revenue reached RMB 4,526.0 million (US$666.6 million)
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Quarterly deliveries of ES8, ES6 and EC6 were 12,206 vehicles
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Quarterly vehicle margin reached 14.5%, which is extremely good considering NIO is only 6 years old (while Tesla has been around for almost 16 years to drive profitability)
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NIO’s quarterly gross margin reached 12.9%
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NIO’s net loss amounted to 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.
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Excluding stock-based compensation expenses, adjusted net loss (non-GAAP) was RMB997.8 million (US$147.0 million) in the third quarter of 2020, a decrease of 59.3% from the third quarter of 2019 and a decrease of 11.8% from the second quarter of 2020.
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Basic and diluted net loss per American Depositary Share (ADS) was RMB 0.98 (US$0.14) in the third quarter of 2020. Excluding share-based compensation expense and appreciation on non-controlling interests redeemable up to redemption value, adjusted and diluted basic net loss per ADS (non-GAAP) was at 0.82 RMB (US$0.12).
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Cash and cash equivalents, restricted cash and short-term investments amounted to RMB 22.2 billion ($3.3 billion) as of September 30, 2020.
You can view the full revenue report by by clicking here.
NIO Future Forecast (Q4 and Beyond)
NIO’s delivery expectations for the fourth quarter are 16,500 to 17,000. 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.
Chief Financial Officer Steven Wei Fang said auto investors should expect NIO to deliver between 16,500 and 17,000 vehicles in the fourth quarter, generating revenue of between $922 million and $948 million.
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NIO ES8, ES6, EC6 are in mass production and top the charts in terms of sales
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2 sedans will be available soon and currently in preparation (most should be revealed on January 9 during NIO day). Remember, Tesla’s Model 3 (also a sedan, which is their best-seller for them). NIO currently does not have a sedan on the market. So this can be a huge growth driver for the company.
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NIO can generate additional revenue by selling government regulatory carbon credits (this is also what Tesla does)
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Expansion in Europe next year (Q2 2021), starting with Denmark and Norway
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NIO recently launched the 100 kWh battery with a range of over 510 km or 317 miles.
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NIO will soon release a 150 kWh battery with 900 km or 559 miles
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NIO’s Battery Swap Technology 2.0 is a game-changer by swapping your battery in less than 3 minutes.
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BAAS (Battery-as-a-service) strategy and its impacts on results (subscriber-based revenue).
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What BAAS does is quite simple: the initial cost of vehicle ownership is significantly reduced, you can opt for the monthly plan instead (depending on the desired battery size).
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The beauty of it all is that the main engine of electric cars is their battery, so thanks to BAAS you can upgrade, change or replace your car’s battery whenever you want. This makes buying a car much more affordable.
What is NIO LiDAR Autonomous Driving?
Advantages of LiDAR:
1. Much more accurate than camera-based mapping. It can detect the direction of a pedestrian facing and hand signals from a cyclist to predict the next movement.
2. They are NOT fooled by shadows, sunlight on the camera, headlights from other cars and other environmental conditions that could affect a camera-based system.
3. Requires less computing power.
4. Using complex algorithms, the system can identify raindrops, snowflakes, etc. according to Ford.
Below is the video from the YouTube channel “Wagner Saucedo» which I thought was pretty good, covering NIO stock.
Advantage of a LiDAR camera
1. Identify road signs. However, this will be of less benefit as car navigation systems and real-time traffic systems integrate these details into a car’s navigation systems. In some places, traffic lights communicate with cars to improve braking and acceleration.
Therefore, using LiDAR with cameras will, in my opinion, yield much better results than purely camera-based systems. Most German brands have started using LiDAR in their flagship models.
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A hugely positive catalyst for NIO is that China is by far the world’s largest electric vehicle market and 4 times that of the United States.
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The Chinese government (MIIT) has mandated that 25% of all car sales in the country should be electric vehicles by 2025.
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NIO Robo-Taxi is a huge future revenue generator that analysts haven’t factored in. which it plans to launch in 2022 with Intel Mobileye or NIO’s in-house designed chip.
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Robo-taxi is expected to reach $29.08 billion by 2027, growing 61.88% from 2020 to 2027.
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Another big revenue generator that analysts also haven’t considered is NIO’s new battery asset management company.
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The electric vehicle battery market is expected to reach $133.46 billion by 2027, growing 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 nearly $55 per share.
If you ask me, I would definitely recommend buying the stock at these levels. NIO stock could rise 10x this year alone, however, the company is just getting started, with 2 sedans yet to launch.
Furthermore, the news is that NIO will increase monthly vehicle production to around 7,500 per month starting in January. And that makes perfect sense, doesn’t it. With 2 sedans on the way and premium SUVs already popular, these numbers will only increase in the future.
The only caveat here is, in my opinion, will NIO be able to expand outside of the Chinese market? Even in the Chinese market, there are around 500 electric vehicle companies, including XPENG, BYD and Tesla. But I think NIO will definitely continue to grow over the next 5-10 years at least.
Thanks for reading, let me know your thoughts and comments below.
