2021 Strategy Series: Nio Inc. - NIO
Vested with an initial price at US$43.85.
Electric Vehicle (EV) is the talk of the town.
I am sure most of us have some form of EV related companies in their portfolio. I do have more than a couple of EV companies in my portfolio – the last discussed CRNC is one.
*Do note that I am still holding onto CRNC and APPs despite the last market correction.
Today I will be discussing another EV company today – It is a China EV company that promoting a very unique proposition – Battery As A Service. My average share price as of today is $32+.
It is a controversial pick – especially by one who emphasize on Fundamentals. But I believe my explanation below will allow you to understand why I choose this company as an investment.
Part 1 – What the Company Does?
Taken from one of its press release, “NIO Inc. is a pioneer in China’s premium smart electric vehicle market. Founded in November 2014, NIO’s mission is to shape a joyful lifestyle. NIO aims to build a community starting with smart electric vehicles to share joy and grow together with users. NIO designs, jointly manufactures, and sells smart premium electric vehicles, driving innovations in next-generation technologies in connectivity, autonomous driving, and artificial intelligence. Redefining the user experience, NIO provides users with comprehensive and convenient power solutions, the Battery as a Service (BaaS), NIO Pilot and NIO Autonomous Driving (NAD), Autonomous Driving as a Service (ADaaS) and other user-centric services. NIO began deliveries of the ES8, a 7-seater flagship premium electric SUV, in China in June 2018, and its variant, the 6-seater ES8, in March 2019. NIO officially launched the ES6, a 5-seater high-performance premium electric SUV, in December 2018 and began deliveries of the ES6 in June 2019. NIO officially launched the EC6, a 5-seater premium electric coupe SUV, in December 2019 and began deliveries of the EC6 in September 2020. On January 9, 2021, NIO ET7, the smart electric flagship sedan and NIO’s first autonomous driving model, was officially launched.”
Basically, the company is Nio Inc. In my words, it is an EV manufacturer that (1) really has a focus around the customer and (2) has a unique battery solution (as compared to all its competitors, other than 1 other company) via swapping of batteries through their swap stations.
Part 2: The Segment of Fundamental Scorecard That Caught My Eyes
Fundamental Scorecard is a visualization tool that simplify all quantitative information into graphs while calculating the intrinsic value using timeless theories, and providing conclusions about the company for the reader to have an easier time to make decision.
What caught my eye is the increasing revenue, the reduction in losses, no issue in its balance sheet and the HUGE Growth. This made me look forward to the understanding about the company's story.
If you are interested to know more about EVs in the investment world, click here.
Part 3: My Qualitative Research with USCCR
Similar to Fundamental Scorecard, USCCR is my own simple way of doing Qualitative Research. Qualitative research is important because it Builds Conviction of a company you are intending to buy or is holding, even if the whole world is against you. It will Reduces the chances for you to make Rash Decisions that you may regret later.
Understand The Business – Solely China Only Revenue. 93%:7% Vehicle Sales:Other Sales
Scalable / Macro Trend – EV Trend + China Wants To Be An EV King + Support from Government
Competition – EV Companies in China – Tesla, Xpeng, Li Auto, Geely, BYD, etc
Catalyst / Future Growth – Overseas Expansion, Working with Sinopec/SAIC (China Government Related Entities)
Risk – Sudden lack of support from Government
To explain further:
1. Nio is solely selling its vehicles in China. But that is possible to change in 2021, as stated in their latest transcript, there are announcement that they are intending to move into Norway. US is also not rule out, but probably in the longer term.
2. China has a change in its EV subsidies policy. It is reducing its subsidies for EV but there is an exception – As per article, “However, China’s subsidies typically apply only to vehicles priced under RMB300,000 with a notable exception granted to vehicles built with battery swapping tech—a process that allows consumers to easily replace the car’s battery once it runs dead or needs an upgrade.”
Nio has a battery swapping service for its vehicles.
This policy will force those EV manufacturers in China without a battery swapping service to consider having battery swapping service for its future model.