NIO, Inc.: The Tesla of China

written on November 5, 2020

Thought that Tesla is at it alone in the electric car rally? Meet premium, luxury electric car maker NIO. Often proclaimed as the ’Tesla of China’ for its disruptive effect in the Chinese automotive market, the company has become one of the country’s largest electric car makers, setting itself apart from the rash of startups, while recognised as one of the largest challengers to Tesla’s success in China. 

Once on the brink of bankruptcy, NIO delivered close to 20,000 cars in 2019, marking an 81% year-over-year increase, while its stock has recently jumped 85% year-to-date following the company’s Q1 earnings beat. With a market capitalisation of $34 billion, it is charging forward in its attempt to reimagine the Chinese auto landscape and while its cars may only be seen on the roads of China, NIO has its eyes on the European market and beyond. 

A brief history of NIO

NIO has certainly come a long way despite its short history. Founded in 2014 by William Li, a Chinese entrepreneur and chairman of Bitauto and NextEV, the company immediately set off to design and produce a small batch of an all-electric sportscar called the EP9. Developed and built in just 18 months and costing half the price to a Tesla Model X, the vehicle has managed to smash a few records, like recording the fastest lap by an electric car at the Shanghai International Circuit, the Nürburgring Nordschleife and the Circuit Paul Ricard tracks, while it also autonomously lapped the track at the Circuit of the Americas in Texas in late 2016 which helped it pave the way for developing its self-driving technology. 

The company was originally named NextCar, however, in 2017 it changed its moniker to NIO. In its Chinese form, the name translates to ‘Blue Sky Coming’ which serves as the company’s guiding philosophy and its commitment to a brighter future absent of pollution from internal combustion engines - i.e. blue skies. The concept is also represented in the company’s logo, where the top part portrays the sky and represents NIO’s vision, whereas the logo’s bottom part reflects the earth and the direction the company is taking. 

Next came the ES8, a seven-passenger SUV which debuted in 2017 and went into production in China earlier that spring, while a smaller five-passenger SUV, the ES6 went into production in 2019. With the introduction of the ES8 model, the company also launched NIO Pilot, its SAE level 2 semi-autonomous system that offers ADAS (Advanced Driver-Assistance Systems) features such as lane keeping, adaptive cruise control, automatic emergency braking, highway pilot and others.   

Forward looking and presenting a powerful proposition, following the Chinese government’s blessing for companies to sell electric vehicles without a battery, NIO launched its Battery-as-a-Service (BaaS) product. Largely reducing the upfront car cost, the subscription plan costs a minimum of $140 a month and can get you a $10,000 discount from a NIO car purchase. And unlike its rival Tesla which has attempted battery swapping but never deployed it on a large scale choosing to rely instead on its Superchanrger network, NIO has managed to build a functioning network of 143 battery-swap stations across 64 cities in China. As of August 2020, it has completed over 800,000 battery swaps for its customers, while swapping out old batteries is typically done in less than 5 minutes. 

NIO is also backed by big names too. Tencent, Baidu and Sequoia Capital all have stakes in the company, while it is also involved in the FIA Formula E Championship, the first single-seater, all-electric racing series.

Fun fact:

Shortly after it IPO’d, the NIO ES8 achieved a Guiness World Record when Chen Haiyi from China ascended the Purog Kangri glacier in Tibet and reached an altitude of 18,751 feet in the vehicle, setting the record for the highest altitude achieved in an electric car. According to the company, the feat demonstrated the car’s prowess in high altitude and extreme cold.

NIO goes public

NIO went public in September 2018 with the stock opening at $6, closing at $6.60 and raising $1 billion. The shares hit the ground running on its debut, soaring as high as $13.80 within weeks, but plummeted to just $1.19 in October of last year before improved fundamentals and additional financing gave it a boost. An investor who would have bought a NIO stock at $6.45 at the close of 2018, would have made a nice 57% gain in March 2019 when it closed at $10.16.

However, NIO’s shares plunged again more than 80% from their highs marked last year as financial troubles mounted, while since its IPO, the company has experienced a number of layoffs and several executives departed the company. In the midst of the coronavirus pandemic, sales in the Chinese auto market fell by 12.7% from a year ago according to the Chinese Ministry of Industry and Information Technology, but then in July 2020, new energy vehicles, including pure electric and hybrid cars reported their first sales increase, up by 19.3%. 

NIO’s future looks bright

As China’s electric vehicle push is gaining momentum, NIO is positioned at the forefront, pressing ahead with plans to expand in Europe and beyond and with preparations already underway for entering major global markets by year 2023 and 2024. The company also managed to get a lifeline of $1 billion from investors, while car deliveries hit new records at 3,740 in June, topping 10,000 for the second quarter overall, pushing shares up by more than 240% so far this year.

With an anticipated strong growth, innovative battery programmes and the right fundamentals in place, NIO’s stock can offer good potential to those looking to invest for the medium to the long-term.     

Invest in NIO (NIO) with Moneybase Invest

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