Is NIO a buy stock? Bullish analysis
By: Paulo Sá
Tags: Tesla, Electric Vehicles, China, Nio

In my latest post on $NIO (Nio Inc.) Q3 earnings resume, there were a lot of comments and arguments on which company is best or which will grow, etc, almost like there is a war between the two companies (and there is not), which leads me to make this in-depth analysis on NIO.

🔋 𝐁𝐚𝐚𝐒 (𝐁𝐚𝐭𝐭𝐞𝐫𝐲 𝐚𝐬 𝐚 𝐒𝐞𝐫𝐯𝐢𝐜𝐞)

NIO pioneered the BaaS model, which stands for Battery as a Service.

Basically, this technology allows customers to drive to an NIO swap station and just in 3 minutes (or less) be able to swap their battery to a fully charged one.

Earlier in October NIO announced that the cumulative number of its EV battery swap service in China has reached 1 million. Since the beginning of the year, NIO also expanded the size of its battery swap network from 131 stations to 155. Being NIO the only company that adopts battery swapping technology among the new vehicle production companies, that makes many customers opt for NIO, rather than its competitors.

There is more to that. NIO has just introduced a new 100 kWh battery and for existing NIO customers, this means they can upgrade, through the swap station, to a larger battery at an affordable price. Let’s say you need an extra range for a month or two, you can use the 100 kWh as long as necessary, and then when you are done, the original battery can be re-installed. 𝗡𝗼 𝗼𝘁𝗵𝗲𝗿 𝗘𝗩 𝗺𝗮𝗻𝘂𝗳𝗮𝗰𝘁𝘂𝗿𝗲𝗿 𝗼𝗳𝗳𝗲𝗿𝘀 𝘀𝘂𝗰𝗵 𝗳𝗹𝗲𝘅𝗶𝗯𝗶𝗹𝗶𝘁𝘆.

These swap stations are really a differentiating factor in China because due to overpopulation and lack of land to build new houses, the majority of people in China live in large buildings/apartments where there is no infrastructure to support electric chargers to charge the electrical cars overnight.

🧐 𝗡𝗜𝗢’𝘀 𝗹𝗼𝗻𝗴-𝘁𝗲𝗿𝗺 𝗮𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲 𝗶𝗻 𝗖𝗵𝗶𝗻𝗮.

As you might already know, the Chinese government is well known for censoring the content that is allowed to be viewed in China, by blocking every social media platform outside of China. Not only that, China has a culture where the government knows almost everything about its citizens through technology and data. It’s clear that they don’t want American companies to have much data on the Chinese population.

𝐍𝐨𝐰, 𝐢𝐟 𝐰𝐞 𝐭𝐡𝐢𝐧𝐤 𝐚𝐛𝐨𝐮𝐭 𝐭𝐡𝐢𝐬, 𝐓𝐞𝐬𝐥𝐚 𝐢𝐬 𝐚𝐥𝐬𝐨 𝐚 𝐝𝐚𝐭𝐚 𝐜𝐨𝐦𝐩𝐚𝐧𝐲, where they collect data through its self-driving software and I don’t really believe that China will allow that to happen in its country.

Although $TSLA (Tesla Motors, Inc.) (Tesla Motors, Inc.) has exported cars to China for years, as NIO and other local companies start to get traction in China, the Chinese government will most likely put more implications on Tesla, giving more power to local companies (NIO and Xpeng for example).

✌️ 𝗡𝗜𝗢 𝗪𝗲𝗹𝗰𝗼𝗺𝗲𝘀 𝗧𝗲𝘀𝗹𝗮

NIO and Tesla have no war going on, it’s quite the opposite. They welcome Tesla.

In 2018, as the Chinese government announced its plans to allow foreign Electric Carmakers, Lihong Qin, co-founder and president of NIO said: “We welcome big players and nice companies like Tesla.”

Even recently, in their last earnings call, they were asked about their opinion on Tesla introducing the Model Y in China competing with their SUV’s, and simply William Li, Founder and CEO of NIO, answered “We believe that this is actually good for the users because if we have more options for the users, then this can help us to accelerate the popularization of the EV in the market.”

This is very smart from NIO, since the EV market is growing, if Tesla grows, they grow, it’s just simple as that. We should not forget that over the following years, there will be an ongoing transition from ICEs to EV cars and NIO will take a percentage of that market share.

🚗 𝗡𝗜𝗢’𝘀 𝗥𝗮𝗻𝗴𝗲 𝗼𝗳 𝗖𝗮𝗿𝘀

NIO range of products is limited to SUV’s for now, which are the EC6, ES8, ES6 models. This is about to change as they are planning to introduce 2 new Sedan models by 2021, in order to compete with Tesla Model 3.

William Li, Founder and CEO of NIO, stated in the last earnings call “With the launch of the next two new products (two sedan vehicles), we believe we can complete our product portfolio.”. This will be critical for NIO’s next year’s market development, as this will probably attract thousands of new customers.

🤓 𝗠𝘆 𝘁𝗵𝗼𝘂𝗴𝗵𝘁𝘀 𝗼𝗻 𝗯𝗼𝘁𝗵

I’ve no doubt that Tesla will be the biggest brand in the EV market in the next few years. Although we can now understand that NIO is doing some incredible stuff, solving its customers’ pain and we should not forget that the EV market is just growing so they are very likely to grow as well.

This might be a lifetime opportunity to be able to invest in such 2 innovative and disruptive companies in the car industry, so I’ll not want to waste it and will take the train of the two. Not only to say that by investing in these two, and/or any other EV maker, we are diversifying our portfolio and reducing our investment risk.

𝐀𝐟𝐭𝐞𝐫 𝐫𝐞𝐚𝐝𝐢𝐧𝐠 𝐭𝐡𝐢𝐬 𝐚𝐫𝐭𝐢𝐜𝐥𝐞, 𝐰𝐡𝐚𝐭 𝐚𝐫𝐞 𝐲𝐨𝐮𝐫 𝐨𝐩𝐢𝐧𝐢𝐨𝐧𝐬?

Let me know your thoughts in the comments.

𝐃𝐢𝐬𝐜𝐥𝐨𝐬𝐮𝐫𝐞:

I am completely bull on Tesla. I’m fully aligned with their vision and happy with the progress they have made so far. If they manage to maintain this pace of growth and innovation, I believe that Tesla will remain the most valuable EV brand in the world in the next 10–20 years.