Shares in Nio’s ADR NYSE:NIO on the NYSE are well, well down on the 12 month highs, with investors being forced to swallow a 40% loss on the stock in USD over that time frame. Enthusiasm for the Chinese electric vehicle maker is currently on the ebb, also compelling a change in focus by management as it works to make the EV maker profitable.
Nio’s profitability is one of the biggest concerns among investors right now. Experts recently told specialist research house Third Bridge that Nio and other start-ups are still burning cash.
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It seems to be that we are reaching that important ‘wake up and smell the coffee’ moment for specialised electric vehicle makers, as they start to be held to the same requirements by investors as boring old auto makers. Is the party over and is it now time to clear up the house before the parents get back?
To this end we saw Nio spin off its battery making unit earlier this month. Nio said the unit would potentially be made independent before the end of this year, and that it was seeking investors to back the new enterprise. The move is being seen by analysts as an effort to make the parent company profitable, sooner than originally anticipated. Nio also reported narrower than anticipated losses this month, with revenue up 47% on a y-o-y basis.
“In the future, domestic mainstream enterprises will catch up with and surpass emerging brands because they are researching and developing by themselves to gain control over the upper links of the supply chain,”explained Rosalie Chen, a research analyst with Third Bridge. “Our experts believe Nio will continue to acquire factories and build them on its own in the future.”
Nio’s shift in battery strategy
Nio currently focuses on the high-end market in tier 1-2 cities in China through vehicles with an average price of more than RMB 400,000.
In the current economic environment in China, Nio’s launch of a lower-priced sub-brand Alps and its expansion into overseas markets should be future growth drivers, Chen said.
Nio’s battery swapping stations are also potentially a future source of profits. Recently, Nio ended free battery swaps. In the future, in addition to continuing to reduce costs and increase efficiency, it could also achieve profitability through value-added services and joint activities with other companies at the venue.
The cooperation between Nio, Changan and Geely on auto battery swapping could help battery swapping stations achieve profitability and benefit the development of the NEV battery swapping market in China.
“Our experts have previously pointed out that the biggest limitation of Nio’s battery swap station is that it can hardly promote it to other auto manufacturers,” Chen said. “After all, if they follow Nio’s standards, they need to adjust their battery size and vehicle structure accordingly.”
The launch of 20kW V2G DC piles and the connection to the Zhejiang power grid are of great significance to Nio Power’s business strategies. The realisation of V2G projects is conditional. “Our experts believe that the key lies in the level of economic benefits Nio can generate from its interaction with power grids,” Chen concluded.
