“We can really think of Nio as the original Tesla of China”. Nio is not a very known brand in the United States but is a leading player in China’s electric vehicle market. The company is an automobile manufacturer that operates in China. The company designs, develops, and manufactures electric vehicles just like that of the famous Tesla.
Nio Inc. (NYSE: NIO) was founded in 2014 by the Chinese billionaire William Li. The CEO of Nio was inspired by the American electric vehicle Tesla (NASDAQ: TSLA). He was able to connect with an executive of Ford Motor and with other big-time investors with whom he shares the same vision: To make a Tesla of China from scratch. Li was backed by huge companies, one of those is Tencent which up to now has still a large stake in the car company.
But it was not all roses for Nio because they encountered immense problems along the way. Since starting in 2014, the company was able to rack up almost $6 billion in losses. In 2020, Nio was on the brink of filing for bankruptcy but it managed to turn the tide around and eventually emerge as the 4th most valuable automaker globally. “Nio was in serious financial trouble. In fact, they needed a bailout from the Chinese Government just to survive the 1st quarter of 2020,” said Michael Dunne, CEO of ZoZo Go.
Despite the negative effect of the pandemic on the company, the company still managed to develop and grow. It was able to deliver a sales value amounting to $628 million and was able to produce and sell 12,206 units in the 3rd quarter of 2020. The company had its best month in November last year wherein it achieved a new milestone and recorded a double digit YOY growth for 8 consecutive months.
In a market that is still emerging and is dominated by combustion engines, electric vehicles globally are seen increasing in numbers of production. “This seems like there’s no turning back at this point with Tesla’s valuation just so sky-high. It’s the technological trend. We are going electric!”, Dunne exclaimed.
In 2016, the company with the help of its Formula E-racing division announced its 1st electric vehicle, the NIO EP9 or Electric Performance 9, which is a 2-seat sports car that can run up to 427km per hour or 265miles per hour and is powered by lithium-ion batteries. William Li claims that his car can go from zero to 60 in 4.4 seconds and about 220 miles of full battery capacity. Nio is more of a tech company and has distanced itself from conventional automakers like Tesla. Dunne marked, “They make no secret of the fact that they are a tech company first and they’re highly inspired by Tesla.”.
The cars of Nio are packed with a lot of high-tech devices, and the most notable one is their integrated smart assistant, Nomi that is similar to Apple’s Siri and Amazon’s Alexa. “They have this cute little thing called Nomi, it’s an AI assistant and you can give it commands to do virtually everything you want,”. Nomi is a built-in personal assistant inside a Nio car that can entertain you by telling it to play a piece of music, adjust the car temperature, tell it to open and close the windows, or even snap a selfie. It follows voice commands but as of now it just recognizes the Chinese language.
Nio highlights that it is a lifestyle brand. It has its ‘owners only’ social network and exclusive social spaces called Nio Houses. “You have people kind of associating the brand with more than just a vehicle but a certain lifestyle.”, said Deutsche Bank’s Edison Yu.
The company currently offers 3 types of vehicles in China namely, the ES8 that is worth $72,000, a full-sized SUV, the ES6 that is worth $55,000, a mid-sized SUV, and the EC6 that is worth $56,000, a crossover coupe.
Dunne mentioned, “It’s not only the largest market for premium vehicles, it’s also the largest market by far in the world for SUVs and Chinese’ love their SUVs.”. There are also other Electric Vehicles in the Chinese market but Nio and Tesla are at the top of the list for most units sold. Accordingly, Nio is targeting premium customers who love technology and it is beginning to steal sales from other prestigious car companies.
Nio also offers high-class services like repairs. If the car encountered a problem, someone would literally pick it up or do a home service job. If you run out of battery along the way, they will send a mobile charging truck just for your vehicle to be energized.
In 2018, the company introduced its first battery swap station and has built 162 charging locations as of now. In less than 10 minutes, owners can swap their batteries with a fully charged one and get back again on the road. “Tesla took in the idea of battery swapping and dropped it but Nio seems to be convinced that this is the way to go and they are sticking with it.”, said Dunne. Nio is now selling its cars without batteries and letting owners lease a battery with a corresponding monthly rent in an attempt of giving their buyers a discounted price.
Nio went public on the New York Stock Exchange in 2018 and was able to raise $1 billion and achieved a $6.4 billion valuation.
The auto industry experienced a very big decline in the last 18 months together when the Chinese Government cut its support for electric carmakers. Faced with these problems, Nio laid off 1,200 employees. It was also forced to sell its Formula E-Racing Team and to delay its electric sedan. “Through the end of 2019, Nio was struggling and in the 1st quarter of 2020, Nio got to a point where they said, ‘In order for us to survive, we require a bailout’.”, said Dunne. In relation to this, Nio received $1.4 billion in funding from the Chinese Government in exchange for a 24.1% stake. As a result, its stock surged a massive 30% right after the announcement was made. Dunne also said that ” When the stock went up again, they were able to secure some new funding and more or less pay off that loan,”.
The company turned to JAC Motors to build the ES6 and the ES8. JAC made a deal with Nio, where they allowed Nio cars to be built in their factory given that Nio would provide all the materials needed. Through their joint venture with JAC Motors, Nio was able to achieve a milestone of 50,000 cars produced but is just a fraction of Tesla’s Shanghai production.
Meanwhile, China is determined to lead the world in Electric Vehicle Technologies by spending subsidies to help EV companies sell most of their electric cars. “One of the reasons why Tesla did extremely well in China this year because it had price cuts a couple of tons. Tesla now is 18% less compared to when the Model 3 was just launched.”, said Junheng Li, CEO of JL Warren Capital.
According to Nio, it has plans to expand in Europe, the United States and it plans to enter the global market in 2023 or 2024.
In recent months, Nio garnered impressive investor interests “It makes sense in the future if you believe that this will be a winner and to be an Iconic aspirational brand.”, said Yu.
On a final note, Michael Dunne stated, “The extent to which the market is valuing these companies with pretty small volumes that is 50,000 for Nio in an annual global market of 90 million and yet could be valued on a par with Daimler and well above Ford and Nissan. The market sees something… and it’s worth taking a look at”.