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NIO: Can Almost See The Turning Point

Jun. 03, 2020 10:18 AM ETNIO Inc. (NIO)TSLA101 Comments
Capital Catalyst profile picture
Capital Catalyst


  • The new EV subsidy extension is a breeze to NIO.
  • The recent earnings call suggests a potential turn with its financial in 2020.
  • NIO's service-focused sales strategy will likely be the game-changer in the long term.


In Q1 2020, NIO (NYSE:NIO) delivered a total number of 3,838 ES8 and ES6 as the country was heavily impacted by COVID-19. What sparked my interest to write on NIO is their forward guidance and their resistance to get through past challenges. I tend to believe in NIO's future and will turn more bullish if I see confirmation from these areas 1) gross margin improvement 2) mass adoption of the battery as a service 3) continued cultivation of its client base. While many contributors have done quite impressive and in-depth analysis on NIO, I want to write on the aspects I found interesting and, hopefully, provide you with some fresh views on NIO.


Source: NIO Inc.

What is different with this EV subsidy extension?

First of all, for me, it is extremely difficult to believe that China would allow the automotive market to be dominated by a foreign brand - Tesla (TSLA). Not only is the EV market an extremely lucrative market but it also has significant strategic importance for China to boost its high-end manufacturing. Therefore, NIO, as the current leading domestic EV player in China, will be backed by supportive government policies to ensure its survival, unless some other domestic brand proves to be superior.

Such a supportive policy can be shown by the recent changes in subsidies for EVs. Previously, the Chinese government planned to end the new EV subsidy in 2020. Given the economic hurdle caused by the pandemic, the finance ministry announced the tax exemption till 2022 and the new plan to cut subsidies by 20% in 2021 and 30% in 2022. Though this renewed policy provides some breathing room to the EV companies, the subsidies will apply only to cars costing less than 300,000 yuan ($42,376). That is likely to exclude premium electric vehicles (i.e. potential premium EV from BMW or the premium models from

This article was written by

Capital Catalyst profile picture
We are a group of young professionals graduated from business schools with a passion for finance and stock investing. We write macro topics that we are interested in and look at stocks that we will personally invest in our portfolios.

Analyst’s Disclosure: I am/we are long NIO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (101)

Adambombfx profile picture
Implied Volatility Surging for NIO
I picked up 100 Tesla at $25 when they first released. Bought a house when I sold at $250. Friend works at space x. Mentioned NIO. Immediately bought 150 @$1.50. Have about 300 now. See what happens. Great article. Good comments all around.
One should keep in mind that Nio has founded a new company Nio-China. The operating profit from this share goes into this company, but the shareholders have nothing to gain from it. Because in this share the debts remain and everyone should know how they are financed. I think there will soon be another massive capital increase. So whoever stays in this share does not need to be surprised about the losses later on.
This share has nothing more to do with growth if the operating business is no longer in this share at all. Therefore I recommend to all those who invested here to read the contracts thoroughly.
TommyIrish profile picture
"One should keep in mind that Nio has founded a new company Nio-China. The operating profit from this share goes into this company, but the shareholders have nothing to gain from it. Because in this share the debts remain and everyone should know how they are financed. I think there will soon be another massive capital increase. So whoever stays in this share does not need to be surprised about the losses later on."

NIO shareholders are suspending disbelief - well, probable not forever.
Henrik Alex profile picture
Company raises up to $490 million which should address short-term liquidity issues. With Tesla trading above $1,000, the capital markets are wide open for EV companies.

Well done, NIO.
It's a $0 or $50 stock in 2 years, let's see.
I have thrown some money on it, like playing in casino. 50 grands, will turn to 0 or half million.
Nio, like Luckin, is just a money machine on the stock market. It's not really about the car, but how can I best get a lot of money from American shareholders. In return, new success stories are constantly being placed in the media. It's the same game over and over again and yes, such shares should be banned on the US stock exchanges.
malcolm.earp profile picture
Foxi ...NIO was entirely designed as a business and technology by my late boss Dr Martin Leach (ex-President of Ford Europe)
Believe what you want but it’s as sound as any other motor company and supported in China which is the #1 global auto market
Capital Catalyst profile picture
Thanks Malcolm. I am curious on your thoughts for the battery swap tech. Did Dr Martin also set up that part? any thoughts are appreciated.
coconutt profile picture
@Foxi .. the local gov invest around $1 bill USD another party just committed over $300 mill. I think Tencent has a large stake, along with some other large Chinese companies. Although I understand the concern with Chinese companies I will give them benefit of doubt. Not all Chinese companies are "money machines".
value1m profile picture
Tesla is in china market for a reason.
But this is good competetion and advertisement of EV cars to Nio.
Nio will be the poormans Tesla.
might be at least 1/4 of Tesla value which is 100-200 ps when sales on EV ramp up. Nio has a battery technology that is worth its competetion. The easy swap of battery is a valuble feature of Nio. The battery life is equal to the life of car.
coconutt profile picture
@igme1612 i will take 1/4 Tesla Value.. that would be a 7x from here
Nio is pricier than tsla and sure doesn't have the same look. No thanks to the car or the stock.
JamesHalliday profile picture
I find this article describing the situation in more details - www.theverge.com/...

to sum up: the government bailout NIO and and as a result Goldman upgraded the stock to buy... very logical or not?
when the government bails out companies, the company survives and the stock goes up - yes logical
JamesHalliday profile picture
Well it depends on what terms they do it. As always, there is the "the devil is in the details"
rapercapital.com/... by @Jeremy Raper

after reading above analysis I think that as a car itself NIO could be good but as an investment maybe it is not. to risky to hold a China/Cayman company with a lot of debt, while it transfers some of its assets (but not liabilities) to new NIO China entity and so on. WDT?
value1m profile picture
Yep this means that Nio is under the wings of chinas funding for the longterm if they end up owning company via terms of funding or Nio will work there ass of to pay up chinas funding.
Does anyone know if NIO has a listing on another stock exchange than NYSE? I kinda like the prospects for this company but I'm cautious that the listing on NYSE is ADR type and could be revoked if tensions between US & China flare up again. Looked for listing on Shangai & Hong Kong stock exchanges but did not manage to find it there? (which is odd for a Shangai based company?)
Henry Wolfe profile picture
I am long in TSLA, NIO and NKLA, however when I was in Shanghai in December I looked but I did not see a single Tesla or Nio. Plenty of electric vehicle brands that I had never heard of though.
Great piece. Will add to my list
InvestRite#1 profile picture
I think I'll stick with an American company thank you very much
I live in China, in Beijing. I do not see any NIO cars on the streets.
Tesla cars are everywhere now, but I never ever saw a Nio car.
I was at the Shanghai Carshow last year and Nio had the biggest booth, the biggest presentation... all other car brands looked like peasants compared to what they had. They also had a bunch of Europeen people "working for the brand" right there on the booth.
I couldn't believe it, and I told myself "when something is too good to be true, it usually isn't".
I don't know much else about this company. All I know is the impression it gives me. They play it like "we are huge, look at us, we are throwing money all over the place". That was also the case for OFO a few years back, and OFO is dead. I would not invest in that brand cause it screams that it is stealing money from investors the good old chinese way. A bit like LeTV did a few years back.
Last thing is, Chinese people don't like chinese brands, especially for cars, so I have no idea who is going to buy these. And if they have the money for one of these cars, they'll just buy a Tesla instead.
Still, in the end, I may be wrong and they might do amazingly well in the future. Just wanted to share my feeling here.
yangxq profile picture
05 Jun. 2020
I live in Nanjing. I see more ES8/6 than Model 3 around my office. I think it just depend on where you live.
coconutt profile picture
@lionel.brugeaud u havnt seen one nio car? cmon.
You have a point. It would make sense.
Long NIO
irsh profile picture
04 Jun. 2020
I'm in 200 shares to keep an eye on them for a while. China wants to be a leader in the world EV market.
Income Sniffer profile picture
Betamax v. VHS. The Chinese may keep the Betamax Swap alive internally, but the VHS charging stations have a huge infrastructure lead everywhere else.
the inherent value of all chinese companies may be worth something, but the perceived value of all chinese companies are zero.
I prefer Japanese cars. My Camry still runs great after over 20 years.
cyantist profile picture
I am a great supporter of electric vehicles. I was an early adopter of the Tesla S (2013) shortly after Elon touted the ability on YouTube to change the battery in less time than it takes to fill an Audi with gas. To me, that was the solution to range anxiety and interminable charging delays. Unfortunately, only one battery swap station was ever built. Tesla's are worthless for long trips (500-1000 miles). Stopping every 2.5 hours to charge for 45 minutes to an hour gets old very very fast. When I moved from Florida to Michigan, I drove a Honda minivan and shipped the Tesla because it saved about 4 hours of driving time. Nio has got this right. EVs HAVE to be as convenient as ICE cars to use if they hope to compete. My flashlight has technology that Tesla does not. The ability to insert a new battery when the old one is discharged.
Gambling on a pricey car company from China, that locals do not even like is trouble some with no plans for the company to expand. The cars are very costly and not exactly design award winners.
conejoexpress profile picture
They actually have won awards, including a JD Power, and you must have missed the 69% owner referral rate, up from 45% in 2019. Plus a near fanatic owner base that rose to the occasion for NIO Day which saw record numbers in attendance and volunteers to bring owners together. There’s a community growing that’s undeniable in their love of the brand.
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