The Chinese electric carmaker NIO (NIO) is the fast-growing stock in the universe. Astonishingly, NIO’s share value grew from $3.72 on 2 January 2020 to $54 on 27 November 2020 to $45.35 on 3 December 2020.
People are buying NIO (NYSE: NIO) because it resembles Tesla Motors (TSLA), the world’s most valuable automaker. In 2020, Tesla’s share value grew from $86.05 on 2 January 2020 to $593.38 on 3 December 2020.
Notably, NIO’s lineup of vehicles resembles Tesla’s. For example, NIO’s ES8 and ES6 crossovers resemble Tesla’s Model Y and Model X sport utility vehicles (SUV). Conversely, I think NIO’s vehicles look more conventional than Tesla’s cars.
NIO vs. Tesla
Similarly to Tesla (TSLA), NIO is launching self-driving vehicle technologies. For instance, NIO relaunched Level 4, its’ homegrown autonomous driving project, KrASIA claims. NIO and Intel’s (INTC) Mobileye autonomous vehicle subsidiary are developing Level 4.
However, I see no evidence that NIO has anything comparable to Tesla’s Auto Pilot self-driving system on the road. In fact, Electrek claims Tesla will release Full Self-Driving Beta update soon.
Full-Self-Driving Beta allows vehicles to turn on city streets and links to Tesla’s Navigate on Auto Pilot feature-complete self-driving system, Electrek claims. Thus, Tesla could be have the world’s most advanced autonomous vehicle technology. Tesla could be close to full autonomous vehicles.
I think fully autonomous vehicles could generate enormous amounts of money. For example, they could use Tesla Auto Pilot for self-driving taxis, delivery vans, and excavation and mining machines.
Tesla has proven it can deliver enormous of vehicles. Statista estimates Tesla delivered between 367,000 and 368,000 vehicles in 2019. In contrast, NIO delivered 12,206 vehicles in 3rd Quarter 2020, 10,331 vehicles in 2nd Quarter 2020, 3,838 in First Quarter 2020, and 8,224 vehicles in 4th Quarter 2019.*
Why Investors love NIO
Therefore, Tesla is a proven automaker, and NIO is a startup that has built a few thousand vehicles. However, NIO is cheaper than Tesla (TSLA).
I think people buy NIO (NIO) for three reasons. First, NIO is far cheaper than Tesla. Second, NIO is a Chinese company. I think many people are moving their money to China because the People’s Republic appears to be safer than the United States.
Notably, Worldometers estimates the United States reported 135,341 new coronavirus cases and 270,734 coronavirus deaths on 27 November 2020. In contrast, the People’s Republic of China reported 1,179 new COVID-19 cases and 4,634 coronvirus deaths on the same day. Consequently, China’s future appears brighter than America’s, to many investors.
Third, NIO is not a legacy automaker such as Ford (F). Hence, NIO has none of the problems of legacy automakers such as union contracts, a history of producing polluting gas and diesel vehicles, enormous factories, and legacy models nobody buys.
Most of NIO’s lineup is sport utility vehicles (SUVs) or crossovers. I think Even NIO’s EC6 Sedan looks like a crossover.
In fact, Edmunds lists the Ford F-Series, Ram, and Chevy Silverado pickups as America’s bestselling vehicles. The Toyota RAV4 and Honda CR-V crossovers complete Edmunds top five seller list.
Can NIO Make Money with Battery as a Service (BaaS)?
NIO (NIO) is experimenting with an interesting business plan they call Battery as a Service (BaaS).
The idea behind BaaS is to reduce electric vehicle prices by leasing and servicing the vehicle separately. In BaaS, the driver owns the vehicle and NIO owns and leases the battery.
In addition, NIO offers battery swap stations. At the battery swap station, NIO’s techs swap an empty battery for a fully charged one. Hence, you can drive up with a dead battery and drive away with a fully charged battery in a few minutes. The hope is that battery-swap will be faster than charging.
Charging an electric car can take a half hour or longer. Hanging around a car charging station with nothing to do but buy pop from the vending machine can be boring. Note I don’t how popular battery swap will be, because I think most electric vehicle owners will charge their cars at home while they sleep, or the office while they work. Hence, only a few long-distance drivers could need battery swap.
NIO claims BaaS can reduce the price of its cars by ¥128,000 ($19,461.76). NIO describes the BaaS as a ¥980 ($149) to ¥1480 ($225.09) a-month subscription plan. In exchange for the subscription, the NIO owner receives a latest model battery serviced by NIO.
One advantage to this plan is that NIO could sell batteries for other brands of vehicles. Another advantage is that NIO can replace dangerous old lithium batteries and get them off the road fast. Lithium batteries can overheat and catch fire as they age.
Finally, NIO can generate float because the owners have to pay the BaaS subscription if they want a battery for their car.
What is NIO anyway?
NIO (NIO) is a Shanghai-based company with one automobile factory in China’s Heifei Economic and Technological Development Zone. NIO also operates R&D centers in Beijing, San Jose, California, and Oxford, England. NIO has a global design center in Munich.
Presently, NIO offers three models of electric crossovers, the EC6, ES8, and ES6 in China. NIO depends on government subsidies to propel its sales.
II assume NIO plans to market vehicles worldwide. However, I see no evidence that NIO vehicles are available outside the People’s Republic. Thus, I consider NIO’s claim to have a Global Footprint hot air.
NIO launched a 100 kilowatt hour (kWh) battery with flexible upgrade plans on 6 November 2020. A press release claims the battery will offer thermal propagation prevention, a highly integrated design, all-climate management, and bidirectional cloud BMS.
People who buy the 100 kWh battery will receive an upgraded Battery as a Service subscription. The Battery-as- a-Service subscriptions can include free battery swap.
Does NIO Make Money?
NIO (NIO) loses money. The company reported a negative gross profit of -$172.20 million and a negative operating income of -$1.591 billion for 2019.
However, Stockrow estimates NIO’s revenues grew at a rate of 56.08% in 2020. NIO reported annual revenues of $1.24 billion for 2019.
NIO burns enormous amounts of cash. NIO reported a negative annual operating cash flow of -$1.253 billion for 2019. However, NIO reported an annual ending cash flow of $142.19 million.
NIO (NIO) had little value at the end of 2019. The company had $151.73 million in cash and short-term investments and Total Assets of $2.095 billion on 31 December 2019.
NIO is a Terrible Investment
I conclude NIO is a terrible investment because it loses money and has little value. I advise investors that want an electric vehicle maker in their portfolio to buy Ford (NYSE: F).
Ford (F) plans three electric vehicles, and it had $44.831 billion in cash and short-term investments on 30 September 2020. Ford reported $259.943 billion in Total Assets on the same day.
More importantly, Mr. Market paid $9.21 for Ford shares on 3 December 2020. Plus, Ford will pay a 15₵ quarterly dividend on 29 January 2020.
I conclude NIO is a terrible investment when competitors make money and pay dividends. Smart investors will avoid NIO (NIO) because I think it has no value.