NIO seems to be having its moment in the spotlight.
On November 3. after a significant 8.96% increase the previous day, NIO's stock price rose another 6.54% to $35.5 per share, achieving a market value of $48.2 billion, surpassing BMW's $47.3 billion market value. On November 4. it continued to climb by 6.23%, reaching a market value of $51.2 billion, surpassing General Motors' $50.4 billion. On November 5. it surged again by 12.3%, hitting $57.5 billion, nearing Daimler's $60.3 billion.
Comparing NIO's data from the past year, its current stock price is 35 times the lowest point of $1.19 per share when it was on the verge of delisting last October, and 17 times the lowest point this year (March) of $2.38 per share, resembling Tesla's stock price surge several times over the past year.
The short-term surge is closely related to the positive news from the past week, including a significant increase in sales in October, placing it in a leading position among new forces. Additionally, the release of the new phase of the new energy vehicle development plan further strengthened its broad development prospects. The stable rise over the past year is related to NIO's strategic bets. Since 2020. NIO's focus on the battery swap model has received substantial policy support, and it has also collaborated with battery companies to continuously optimize the battery swap model.
However, despite the high stock price, the relatively low vehicle delivery volume seems difficult to sustain it effectively. Coupled with the competitive edge of its rivals' products, NIO still needs more efforts to dispel doubts about its reputation being greater than its actual performance.
Leading the Pack
In less than 10 days, NIO's market value increased by 62.8%. After surpassing traditional domestic automakers such as Great Wall and SAIC in October, it quickly overtook international giants like Honda, BMW, and GM this week, ranking sixth among global automakers. At its current pace, NIO's market value is likely to surpass Daimler, aiming to chase BYD and Volkswagen, and potentially becoming the third-largest automaker by market value globally.
The steady growth in delivery volume and the release of the new round of new energy vehicle plans have been the catalysts for NIO's stock price surge in a short period.
On November 2. NIO announced its October sales data, with delivery volume exceeding 5.000 units for the first time, reaching 5.055 units, marking eight consecutive months of growth. In the first ten months of 2020. cumulative deliveries reached 31.430 units. In comparison, Li Auto's figures were 3.692 units and 21.852 units, while XPeng Motors reported 3.040 units and 17.117 units, placing NIO at the top among the top three new car-making forces.
In addition to leading in sales, earlier deliveries and listings have also given NIO an advantage. NIO began deliveries in June 2018 and went public in September 2018. the earliest among new car-making forces. Despite being criticized for product issues early on, NIO has been continually improving and optimizing after a difficult 2019.
In 2020. as all new forces strive for a final breakthrough, NIO has not encountered major product issues. For newly listed or soon-to-be-listed rivals, hitting snags at this critical juncture can be costly.
WM Motor, preparing for its STAR Market listing, experienced multiple spontaneous combustion incidents in the past two months, leading to a recall of over 1.600 vehicles and hitting its listing process. In October, Li Auto faced several vehicle collision axle-breaking incidents and ADAS function failures, with CEO Li Xiang eventually apologizing for product design flaws. On November 6. Li Auto announced a recall of 10.469 vehicles with potential safety faults. Meanwhile, XPeng Motors saw a month-on-month sales decline in October.
In contrast, on October 29. NIO announced that it had also produced over 5.000 vehicles in a single month, further boosting its capacity. Notably, NIO's average vehicle price exceeds 400.000 yuan, placing its product lineup in the high-end car category and gaining increasing brand recognition.
While leading in intense competition, the release of the new round of new energy vehicle plans has further boosted stock prices, showing significant sustained momentum. The stock price surge this week is largely influenced by this.
On the evening of November 2. the General Office of the State Council issued the "New Energy Vehicle Industry Development Plan (2021-2035)", extending the 2012-2020 plan. It reaffirmed new energy vehicles as a strategic national industry, a primary direction for future automotive transformation, and a growth engine for the economy.
The plan sets several key goals for two timelines. By 2025. key technologies such as power batteries, drive motors, and vehicle operating systems are expected to achieve breakthroughs, significantly enhancing the market competitiveness of new energy vehicles, with new energy vehicle sales reaching about 20% of total new vehicle sales.
In 2019. China's new energy vehicle (pure electric + plug-in hybrid) sales were 1.206 million units, accounting for about 5% of total domestic car sales. A 20% share means new energy vehicle sales need to increase at least fourfold in the next five years.
The second timeline sets several qualitative goals for 2035: pure electric vehicles becoming mainstream in new sales, full electrification of public vehicles, commercial application of fuel cell vehicles, large-scale application of highly autonomous vehicles, and a convenient and efficient charging and battery swap service network.
Continued Benefits from the Battery Swap Model
If the short-term stock price increase is driven by the overall market, the sustained rise since 2020 is due to increased attention to the "battery swap model," reflecting NIO's correct strategy in the new energy vehicle race.
In the cost structure of new energy vehicles, power batteries account for the largest portion, about 30%-40%. However, due to energy attenuation issues, new energy vehicles have a much lower retention rate compared to traditional fuel vehicles.
According to the China Automobile Dealers Association, the retention rate of traditional fuel vehicles is generally around 70%, while new energy vehicles are generally less than 40%. Additionally, problems such as inadequate charging infrastructure and long charging times deter many users from purchasing new energy vehicles.
From its inception, NIO has focused on the "battery swap model" for new energy vehicles, building battery swap stations in cities and along highways. When the car's battery is depleted or aged, owners can drive to a swap station for a free battery replacement.
The battery swap service significantly reduces user concerns about retention rates and provides economic benefits through free battery swaps. In terms of efficiency, users can complete a full battery replacement in minutes at NIO's self-built swap stations, much faster than charging for several hours.
While the battery swap model offers a better user experience, it represents a heavy asset investment for companies. A single swap station costs about 3 million yuan, along with other operating costs, increasing the financial burden on car manufacturers. For a long time, the battery swap model was not highly regarded in the industry.
However, policies began supporting the battery swap model in 2020.
In April, the Ministry of Finance issued new subsidy policies for new energy vehicles, excluding cars over 300.000 yuan from subsidies, but exempting battery swap models from this restriction. During the May Two Sessions, "increasing facilities such as charging piles and battery swap stations" replaced "building charging piles" in the "Government Work Report."
In July, Xin Guobin, Vice Minister of the Ministry of Industry and Information Technology, announced strong promotion of charging and battery swap infrastructure, encouraging companies to develop battery swap models and supporting pilot projects in places like Beijing and Hainan. In August, the GB/T "Safety Requirements for Electric Vehicle Battery Swaps" passed review, establishing a national standard for battery swaps.
NIO's stock price reflected these policy benefits, breaking through $10 in July, $20 in August, fluctuating between $20 and $30 in the following months, and then surging again in November.
Under favorable policies, NIO is also optimizing its operational model to reduce battery swap costs. In August, leveraging its experience with the battery swap model, NIO partnered with CATL, Guotai Junan, and Hubei Provincial Investment to establish Wuhan Weineng Battery Asset Management Co., Ltd., launching the "BaaS" battery rental service, offering comprehensive services for battery separation, rental, swapping, charging, and upgrading.
With the "BaaS" service, users no longer need to purchase battery packs when buying cars, instead renting different capacity battery packs based on their needs. This reduces the car price by 70.000 yuan, with a monthly battery rental fee of 980 yuan.
This model transfers some power battery costs to power suppliers, further reducing users' car purchase costs and financial burden. Power suppliers can efficiently plan large-scale charging, enhance charging efficiency, and recycle aged batteries through technical optimization, reducing costs.
Many automakers are now adopting the battery swap model. SAIC's new models like ER6 have battery swap versions, and Geely made a significant move into the battery swap model in September. Its smart battery swap stations debuted in Chongqing, with plans to complete 35 stations in Chongqing by 2020. 100 by 2021. and over 200 by 2023. expanding from Chongqing to Zhejiang, Shandong, and other regions, covering major cities, provincial, and highway networks nationwide.
According to the China Electric Vehicle Charging Infrastructure Promotion Alliance, as of August, there were 462 battery
swap stations nationwide, with NIO alone building 155 stations. It has also established charging networks on G2 Beijing-Shanghai and G4 Beijing-Hong Kong-Macau highways, with over 1 million battery swaps, reaching a mature operational stage.
Improving Product Power
Despite the stock price surge, NIO's short and long-term increases still rely heavily on policy and prospects. Compared to the high stock price, its total deliveries since inception are only over 60.000 units, with 2019 revenue of 11.2 billion yuan. In contrast, GM's 2019 sales were 7.71 million units, with $137.2 billion in revenue, while Volkswagen sold 10.97 million units with $282.8 billion in revenue.
Beyond small production capacity, product power needs continuous improvement. Tesla's miracle is also due to capital's confidence in its prospects, based on its leading technology and products. Its mature autonomous driving technology and self-developed autonomous driving chips set it apart from both new and old car manufacturers.
NIO has established a strong brand effect, now needing to enhance its product power. It plans to develop its chips. In October, NIO formed an independent hardware team internally, known as "Smart HW (Hardware)". On November 4. NIO confirmed that Bai Jian, former hardware director at OPPO and general manager of Xiaomi's chip and advanced research department, joined its automotive team, further indicating its chip development plans.
However, chip development is not simple. Tesla took three years to part ways with Nvidia and mass-produce its self-developed chips in 2019. repeatedly hiring experts from top chip design companies for continuous development.
After a difficult production ramp-up, Tesla's Shanghai Gigafactory alone can achieve a monthly capacity of 20.000 units. With stable monthly sales of 10.000 units for the domestic Model 3. in October, over 7.000 units were shipped to Europe.
Tesla has achieved several quarters of continuous profitability, while NIO is still in a loss stage. Further refining products, achieving scale production, and increasing investment in key technologies are what NIO needs to focus on for the future.
