Nio – The Best Bet for the Electric Vehicle Market
Nio, a company with a market cap of 67 billion, sells electric vehicles in China and other countries. They are also involved in technology development, such as the manufacture of e-powertrains, battery packs, etc. In addition, the company offers a multitude of charging solutions, including Power Home (a home charging solution), Power Mobile(a mobile charging service through charging trucks), and Power Charger (a public fast-charging solution).
The EV market is expected to grow at a Compounded Annual Growth Rate (CAGR) of 21% and hit 30 Million Cars worldwide by 2030. By 2026, worldwide EV revenue is expected to hit roughly half a trillion USD. What’s more, is that the Asia Pacific market where Nio is primarily located is reported to have the fastest growth. China is the largest EV market in the world, representing roughly 50% of worldwide sales.
“Nio’s strategic goal is to have a consistent, stable order flow, rather than a fluctuating order backlog similar to Tesla. By keeping pricing steady, Nio’s focus lies on services and customer experience driving a positive reputation in the community and keeping engagement high; it also allows gross and vehicle margin to find stable ground as volumes rise.” — J.P. Morgan
BaaS – Battery as a Service:
Nio has chosen to distribute batteries in a non-traditional manner, not including it with the sale of their vehicles and instead of letting customers choose and rent batteries depending on their needs. This shaves off approximately $10,000 off the price of their vehicles, which in turn boosts Nio’s price competitiveness and demand. Also, BaaS acts as an additional revenue source for Nio that will continue to generate cash by nature even if sales take a hit. Nio has hit roughly 1 million battery swaps so far, and these swapping stations even support the EV’s of other automakers. This flexibility of compatibility with other EV’s makes Nio-power (The battery swapping stations) much easier to scale. The BaaS gives Nio an extra revenue stream, it is easy to scale, and has brand visibility.
Nio also has the backing of the CCP. They have been given funding since the beginning by the government to produce a local EV vehicle. With the battle of international brands such as Tesla, the CCP will want a domestic brand to win this battle and won’t mind giving more funding in the future given positive results.
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July 22, 2021 at 11:06AM