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
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
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.