Is this Tesla's biggest rival?

Growth of "NIO"

NIO, which is the Chinese electric automaker, is expected to be the company that is going to challenge Tesla in China.

NIO's stock has risen from 52-week low of $2.11 to peak at $57.20 in 2020.

That's an increase of more than 2,700%.

But, NIO has had its fair share of challenges, including U.S.-China trade tensions and dealing with the economic effects of Covid-19.

So, how did NIO, which was at one point on the brink of bankruptcy, rise from the ashes to become a major player in the electric vehicle industry?

"Made in China 2025" plan

In 2015, China's premier Li Keqiang announced a "Made in China 2025" plan.

This goal is to transform the country from a manufacturing hub of low-value goods to high-tech products in 10 fields including the electric vehicle market.

In the fertile ground, William Li grew his startup, NIO, which he founded at the end of 2014.

NIO's competitive advantage 

There are mainly two differences between Tesla and NIO.

First notable point is that NIO doesn't make its own cars unlike Tesla with giga factories.

Instead, it outsources manufacturing to a state-owned automaker.

Moreover, the most important point is that NIO decided to adopt a different approach to its batteries instead of relying on a charging network like Tesla.

This service is called " NIO's competitive advantage".

Surprisingly, NIO users can exchange their battery thorough a network of battery swapping stations. 

It takes only 3 minutes for a fully charged one, eliminating the wait time, which can be as long as 24 hours for big cars.

Standardization of battery swapping station

 

The Chinese government plans to standardize battery swapping stations in the country.

Consequently, it tries ensuring that all EV owners can use common batteries at any facilities, regardless of their car brands.

It means that a NIO owner will eventually be able to swap batteries at a rival's battery swapping station.

This has allowed manufactures to sell EVs without a battery, effectively making the purchase much cheaper, while also giving EV owners the option to upgrade to a larger capacity battery in the future.

In fact, NIO unveiled a battery subscription service that allows EV users to choose battery packs of various capacities and pay monthly.

The headwind against NIO

NIO was suffered from mounting debt, management departures and negative gross margins caused by trade tensions between the US and China in 2018.

In order to struggle this difficulties, NIO embarked on a cost-cutting campaign, slashing around 2,000 jobs in the third quarter of 2019.

As a result, company's stock was tanked to below $2 at the end of September 2019.

Tailwind and Rapid progress

As China's economy rebounded after the first wave of Covid-19 pandemic, so too did NIO.

In march 2020, the Chinese government announced that it would extend its subsidies and a tax break for new energy vehicles including electric and hybrid cars to 2022.

Due to it, 1.1 million electric vehicles sold in the first 11 months of 2020, up 3.9% from 2019.

NIO delivered over 35,000 vehicles in the same period, more than twice as many as the year before.

Tesla vs NIO

As the company's stock price soared in 2020, NIO became the fourth most valuable automaker in the world.

But, there is an unlikely source to this boost.

Thanks to Tesla's stock jump, investors were encouraged to look for opportunities in other electric automakers like NIO.

It still has a long way to go before it can compete with Tesla, which is the front runner.

The NIO's success will depend on its ability to control its spiraling costs, appeal to foreign buyers and expand its battery swapping network overseas.

Reference Link

Is this Tesla’s biggest rival? | CNBC Explains

2021.04.18.Sun. (Last modified)