NIO Inc: The Tesla Of China?

The Deep Dive look at emerging zero emission vehicle (ZEV) startups continues today with Nio Inc. ADR (NASDAQ: NIO). NIO is among the most advanced emerging electric vehicle companies in this series, and it’s also the one showing the most sustained market success.

It isn’t unfair to call NIO’s ES6, EC6 and ES8 consumer market offerings Tesla (NASDAQ: TSLA) clones. All-glass cabin roofs adorn the sleek looking modern rides, which are available with an in-house developed driver assist software called NIO Pilot that updates over the air (but doesn’t claim to drive the car all by itself), and even an “intelligent fragrance system.”

The NIO ES6 can be yours for as little as ¥273,600, and you can be sure it never runs out of power for another ¥980/mo.

NIO also claims to be developing battery-swap stations much like the ones Tesla demoed in 2013, and is pioneering a battery-as-a-service model that ensures the car never has a flat battery, is always serviced, etc. for a monthly fee. For about $150/ month, the company will send a valet to charge and swap the battery units. It’s pitched as a way to protect the resale value, eliminating the element of battery degradation.

Pricing chart for 3 NIO models from USD conversion added at $0.15:¥1

In nearly every way the numbers can be looked at, NIO’s metrics draw a profile that is aggressively flat, which makes the equity’s strong performance the plausible product of broader market interests in the ZEV auto sector. If the money is chasing an alt-auto trade on the back of Tesla’s success, it makes sense that the stock that didn’t collapse was the TSLA clone.

Is NIO’s intelligent fragrance system an answer to Tesla’s fart app?

Our usual data sources were able to produce quarterly income statements and balance sheet data for this foreign issuer, but not cash flow statements. That’s curious enough to cause us to bring up the fact that there’s been money made speculating on Chinese financial statements and ops reporting being deficient, most recently in the case of Luckin Coffee (OTC:LKNCY), more notably Sino-Forest Products and others, but it isn’t fair to point the dirty end of the stick at NIO just because they’re Chinese.

We have no indication that the income statement and balance sheet provided by NIO are anything other than what they say they are and, frankly, if they were going to cook them, we expect they’d come up with something better than five consecutive quarters of negative gross margin.

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Still, there’s no cash flow statement with which we might calculate a quarterly burn rate, so we’ll just have to use the company’s operating loss as the metric through which we view its $1.5 billion cash position, and $1.56 billion debt position as of June. NIO reports for the period ending September 30, 2020, on November 17th.

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There’s no denying that it’s trending in the right direction, and the company’s dismal top line hasn’t stopped it from raising money yet. Conventionally, operations that run gross losses aren’t worth scaling but, for lack of a more concise explanation… it’s a car company. Conceivably, NIO plans to either cut costs once it gets the product right, or has good reason to believe that economies of scale will improve drastically with volume.

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That volume is still flat, but clearly trending in the right direction.

As a percentage of China’s total auto market, NIO’s output is tiny.

And, as a percentage of China’s total EV sales, NIO’s output is also tiny.

(chart courtesy

But Clean Technica had NIO selling about half as many ES8s as Tesla sold Model 3s in April of 2019, and it doesn’t appear there’s hard data on the TSLA.

A common investor criticism of Chinese issues trading in the US is that they’re often hyper reliant on the help of their native government which in NIO’s case, if true, might make it the Tesla clone it’s so clearly trying to be.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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