Chinese electric vehicle (EV) manufacturer Nio (NYSE: NIO) held its Nio Day 2021 event on Saturday, December 18. Rumors had suggested he might unveil two new electric vehicles for his lineup. It only introduced one new electric car, but the one-off model has some features that make it potentially quite competitive for the US automaker. You’re here (NASDAQ: TSLA).
The company also detailed some of its expansion plans, which, if carried out, could be sharply bullish for the stock. However, all of this optimistic news remains overshadowed by the larger problems in the Chinese market and the uncertainty of its future.
1. The new ET5 sedan could be a major challenger to Tesla
The lineup and features potentially give the new ET5 midsize sedan an edge over the competition if we are to believe Nio’s press release on the subject. Along with acceleration and braking comparable to fairly nimble gasoline vehicles, Nio claims the ET5 has a range of 700 kilometers, or around 435 miles, with the optional long-range battery. The ET5 has a range of 1,000 kilometers, or approximately 620 miles, with an optional “ultra long range” battery. Its standard battery offers a range of 342 miles.
For comparison, the Plaid variant of the flagship Tesla Model S sedan, which CEO Elon Musk says will “likely” be sold in China from March 2022, has a range of 520 miles, as reported by Reuters. .
While the ultralong battery seems to give the ET5 sedan a 100-mile advantage over the Tesla equivalent according to Nio, this range uses the Chinese CTLC test protocol, not the more stringent EPA protocol used to determine Tesla’s range.
This test looks somewhat like the new European driving cycle or NEDC test cycle used in Europe and Australia. The NEDC test is viewed with skepticism by experts, as it produces ranges up to 30% higher than the EVs tested can actually achieve in real-world conditions. While China’s test doesn’t exaggerate the range as extreme as NEDC does, the gap between the ET5 and the S Plaid model is probably much narrower than Nio suggests.
Notably, however, even if the practical range of the ET5 and the S Plaid model ultimately turns out to be similar, the ET5 still has the price advantage. The ET5 costs just over $ 51,000 before grants, while the base price of the Plaid is over $ 134,000. A more comparably priced Tesla, the $ 50,990 Model 3 Long Range, only has a range of 334 miles.
Nio’s new sedan also comes equipped with Nio Autonomous Driving, or NAD. This autonomous driving can be improved with updates as development progresses, with Nio claiming that “full functionality will be rolled out gradually after development validation and will be available to users through a […] monthly subscription. ”Again, the ad language sounds appealing, but the capabilities of the autonomous driving feature remain purely speculative, since the ET5 is not yet available to the public.
Even here, however, the Nio has a pricing advantage over its Tesla counterparts, with NAD apparently included as standard, while Tesla customers have to pay an additional $ 10,000 for the self-driving option.
2. Nio has aggressive international expansion plans
In addition to showcasing ET5, Nio also indicates aggressive expansion plans internationally, building on its 2021 launch in Norway. He says that means expanding to “Germany, the Netherlands, Sweden and Denmark in 2022” and a total of 25 countries worldwide by 2025, although he provides few details.
A unique feature of Nio’s EVs, the ability to swap out a dead battery at a battery swap station within minutes, could be a double-edged sword for its international expansion plans. On the plus side, this feature allows for super-fast “charging” to EV standards, provided an exchange station is available. According to Nio, 92% of Norwegian customers opt for this ‘battery as a service’ deal, indicating that the swap function can be a major point of product differentiation from other electric vehicles and therefore a selling point for international customers who purchase Nio vehicles.
However, the method is not without drawbacks. This forces Nio to spend large sums of money to build the battery exchange stations and maintain them, rather than simply relying on existing charging networks. In July, Bloomberg reported that the company announced plans at its Power Day event to build 1,000 overseas exchange stations by 2025, in addition to bringing its total in China to 4,000 by that date. .
This could represent a significant expense, and while the plans may work in the relatively limited geographic space of Europe, a network of battery exchange stations across the vast territory of the United States, a potentially large international market, could be much more difficult to develop for the point of viability for Nio EV drivers out there.
3. He is still burdened with China’s trade problems
Nio’s new ET5 and plans to roll out short-term sales to dozens of countries would make it a serious contender among newer electric vehicle inventories if it were based anywhere other than China. However, none of its initiatives solve the major problems facing all companies headquartered in the huge Asian country.
New York Stock Exchange delisting a very real possibility for Nio, after Beijing guns Chinese rideshare giant DiDi Global (NYSE: DIDI) to abandon the American stock exchange in favor of a new listing in Hong Kong. Given the growing hostility of the Chinese government towards the United States and the West in general, a similar scenario is not impossible with Nio.
The Chinese economy is also suffering from a wider crisis, with the country’s real estate titan, China Evergrande Group, recently declared in default by Fitch Ratings and S&P Global Ratings, reports Bloomberg. The event is just one of a series of woes and regulatory hurdles crippling large Chinese companies in 2021.
Will Nio overcome his difficulties?
While there is a whole host of factors as to why the value of Nio stock continues to fall, I believe the company’s history will turn out to be bullish for long-term investors. The ET5 sedan lineup may not quite match up with optimistic Chinese test results, and in any case, it will only outperform its rival Tesla with the highest level of available battery installed, so it seems unlikely that it will. it is a “Tesla killer”.
It does appear to have the capabilities to compete on a par with the Tesla Model S Plaid, however, while being much cheaper. Its quick “back to the road” battery swap feature and autonomous driving could be enough to give it at least a competitive edge.
Perhaps more importantly, Nio is producing real electric vehicles, driven by real users on the roads of China, Norway and possibly several dozen other countries in Europe and Asia in the near future. This puts it way ahead of many EV start-ups without work vehicles in showrooms, but with much higher ratings. Its production now exceeds 10,000 electric vehicles per month, allowing it to gain a foothold in the potentially massive growth market for electric vehicles. It looks like an electric car stock with a relatively strong base and a lot of room for growth, so its current low and falling price could be a gold buying opportunity, albeit quite risky.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.