NIO is uniquely placed having both technology & premium luxury status.
Editor's note: This is a guest post from Rafi Khan, an NIO investor, and does not represent the views of CnEVPost.
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Recent Chinese Covid woes no doubt affected Tesla (NASDAQ: TSLA) & NIO (NYSE: NIO, HKG: 9866) stock prices.
Latest numbers for April 17th:
* Shanghai New cases 2,417 Asymptomatic 19,831
* Jilin New cases 166 Asymptomatic 376
* Rest of China New cases 140 Asymptomatic 432
* TOTAL China New cases 2,723 Asymptomatic 20,639
Net result of past 2 weeks' Covid woes:
Even in Shanghai where cases dwarf the rest of China:
Factories are being told to resume full operations with workers taking daily PCR tests.
Basically Govt. is giving the country the green light for the full resumption of industry.
Covid matters were small skirmish – For those myopic NIO investors interested in seeing just to the end of their own noses.
Real battles determining NIO share price in 3,6, 9 months are as follows:
1. TSLA Market Cap
TSLA is Gold Standard. Its future market capitalization which is currently $1 trillion will reflect S&P; Nasdaq; Interest Rates; EV Sector & myriad of other factors. So NIO market cap. will ultimately reflect (a portion of) TSLA market cap.
2. NIO Monthly Sales SUVs EC6, ES6, ES7, ES8; Luxury Sedan ET7, Mid Size Premium Sedan ET5
With upcoming ET5 & ES7 plus completion Phase 1 NeoPark,
NIO will be the first company to challenge TSLA for:
* Product bandwidth
* Latest EV technology/features
* Meaningful capacity
* Manufacturing efficiencies.
NIO is unique:
* Big Legacy Auto including BBA (Mercedes, BMW & Audi) have Premium Luxury status but NOT Technology
* Chinese brands plus TSLA have Technology but NOT Premium Luxury Status
* Only NIO has both Technology & Premium Luxury Status
For the reasons above:
* NIO SUVs (EC6, ES6, ES7, ES8) can develop monthly sales of 20,000 in China & Europe competing against TSLA Model Y, BYD Tang, BMW X5 & Li Auto.
* NIO ET7 Sedan can develop monthly sales of over 10,000 competing with BBA ICE & EVs (which would still be less than 10% of BBA sales)
* NIO ET5 Sedan can develop monthly sales of over 20,000 competing with TSLA Model 3, BYD Seal & others.
* With new introductions, NIO has expanded its Product Price Bandwidth which is now from RMB 250,000 to RMB 600,000
* NIO's product line can generate demand of over 50,000 per month utilizing 600,000 annual capacity of JAC Plant & NeoPark Phase 1.
3. NIO Premium Luxury Moat
TSLA Moat in China is manufacturing capacity & Giga-Press efficiencies in the price range of RMB 250,000 to 400,000.
BYD Moat in China has been its vertical integration lessening supply chain issues & affordable pricing.
Both NIO & BYD have clear paths to match TSLA Chinese manufacturing capacity & have ordered Giga-Presses to match TSLA manufacturing efficiencies.
With ET5, ES7 & NeoPark NIO can traverse TSLA Moat.
NIO largely has operated in the Premium Luxury segment price range RMB 350,000 to 550,000 where TSLA has close to zero sales which is now being expanded with ET5.
Most new EV offerings in Premium Luxury are priced at RMB 700,000 or higher & may not directly compete with ET7.
NIO ET5 will directly compete with TSLA Model 3 & BYD Seal.
NIO ES7 will directly compete with TSLA Model Y & BYD Tang.
* So NIO can traverse TSLA & BYD Moat to enter the lower price segment
* However TSLA & BYD (& even BBA) have NO current ability to compete & traverse NIO Premium Luxury Moat (Quality, Brand, Warranty, NIO House, BaaS, Battery Swap, ADaaS)
4. NeoPark/ Additional Capacity / Giga Presses
Confirmation of demand with additional NeoPark capacity announcements are needed as well as installation of Giga-Presses that take the current 60 jobs per hour (“jph”) to 80 jph that TSLA achieves at Giga-Shanghai to match TSLA manufacturing efficiencies.
5. Vehicle Gross Margins / Average Sales Price
20% NIO VGMs can be supplemented by BaaS monthly premiums for life, ADaaS monthly premiums for next-gen products, fast-expanding sales lowering per EV payments & pollution credits.
6. EV S-Curve / Death of ICE
100% EV growth for 2022 is likely with those developing greatest capacity expansions (BYD & NIO) being the largest beneficiaries. All statistics are indicating the Death of ICE in China at a faster rate than anyone envisioned as more Chinese cities adopt ICE restrictive policies.
7. Technology Leadership
NIO regards AAPL as its primary competitor.
Pre-eminence in Technology is in NIO's corporate DNA.
NIO is showing clear potential for Technology Leadership in all key areas:
* Doubling of 2022 R&D budget
* Semi Solid-State Batteries
* Battery Swap Infrastructure / Partners
* Level 4 Autonomy / ADaaS
* AR/ VR PanoCinema / World Leading Dolby Immersive Sound System
* Unparalleled NVDA computing power
* State of the Art QCOM Infotainment
8. De-Listing FUD / Geo-Political Factors
These will always exist with China aspiring for Global Hegemony especially in EVs. However, it will be difficult to argue Sales, Profit & Growth numbers coupled with:
* Premium Luxury Moat that no other company has
* Technology plus Premium Luxury Status that no other company has
Above 8 are the key factors/ battles, in my opinion, determining NIO Share Price in upcoming months not current, perhaps soon ending, Covid skirmish.
Not a Financial Advisor Nor Auto Analyst JMHO DYODD