NIO Annual Day Seems a Smasher: Should Tesla Take Note?

NIO Inc. NIO, dubbed as the “Tesla TSLA of China”, is pulling out all stops to solidify its standing in the electric vehicle (EV) space. The much-awaited NIO Day (held on Jan 9) filled with fun, fiesta and music has indeed grabbed eyeballs with some major announcements. Has the event managed to live up to the expectations of users, fans and investors alike? Well, it seems so as the stock is up more than 11% so far in the premarket session today. Can NIO give other EV players including Tesla a run for their money as it steps up its e-mobility game with the upcoming product and services launch? Before that, let’s delve into key takeaways from the fourth NIO Annual Day.

Golden Nuggets of the Event

First Flagship Sedan: The firm unveiled a new luxury ET7 sedan, with a base price of around $69,000, which can go up to more than $80,000, depending upon the configuration. ET7 — with a catchy tagline "Ready For Tomorrow" — will be the company’s fourth EV model after ES6, ES8 and EC6. Coming to the aesthetics of the vehicle, ET7 is designed with a “cozy living room” concept. Boasting soft closing doors, frameless windows and seats with heating, ventilation and inbuilt massage functions, the EV has an eye-catching design. Equipped with new autonomous driving technology, ET7 would come with two battery choices: 70 kilowatt per hour (kWh) and 100kWh. While pre-orders for the car began during the weekend, deliveries are expected to commence in first-quarter 2022. By late 2022, ET7 — powered by a 150-kWh battery pack — will be rolled out, which would offer a range of more than 600 miles.

Ultra-High Energy Density Batteries: As expected, NIO announced the 150kWh solid-state battery technology, which would increase energy density by 50%. Promising an enhanced charging efficiency and a better battery life, deliveries of the batteries are expected to start from fourth-quarter 2022. Importantly, the company confirmed that all NIO users could upgrade to 150 kWh. As a reminder, it released the 100-kwh battery pack in November 2020. Announcement of an enhanced 150-kwh battery pack barely within a couple of months goes to show that NIO is focused on improving its technology and battery range amid rising competition.

Next-Gen Battery Swapping Stations: The firm’s next-gen battery power stations — Power Swap Station 2.0 — would enable automatic parking of cars, thanks to the autopilot system. These would also facilitate battery swap with one tap on the button. Importantly, the stations would have the capacity of providing 312 battery swaps daily. The company targets to deploy 500 stations of next-gen Baas (Battery as a Service) by year end.

Driverless Technology: NIO has taken the driverless technology game a notch higher with the Aquila NAD (NIO Autonomous Driving) system. NAD is primarily based on autonomous driving sensors and software suite called Aquila, along with the computing platform called Adam. Boasting 33 high-precision sensors, 12 ultrasonic sensors, 8MP high resolution cameras, 5 millimeter-wave radars, ultra-long distance high-precision LIDAR, two high-precision positioning units and enhanced driver perception, NIO is set to provide a safer and relaxed point-to-point autonomous driving experience. It should be noted that NIO’s Adam is powered by NVIDIA NVDA microprocessors. It would feature four NVIDIA Orin supercomputers on a chip boasting 1,016 TOPS in computing power.

Some Speed Bumps

Amid this air of excitement, there are a couple of things that make us a bit wary. The delivery timelines of its ET7 model and 150-kWh battery pack are not much encouraging. While the car is at least a year away, the battery breakthrough would not be available till late 2022. Another question that comes to mind is whether the company is actually making batteries or is it purchasing the same from CATL?

Reportedly, a reporter received an English translation of NIO’s CEO William Li’s statement. Li is likely to have meant that the company adopts the most advanced production-ready, solid-state battery technology. By not explicitly saying that the firm is manufacturing the battery, one can easily assume that NIO is rather buying the same from CATL. If that’s true, NIO would actually have little control over the production pipeline, and will be exposed to any delays and hindrances by CATL. Additionally, with CATL having partnership ties with various auto biggies including Tesla, Toyota TM and BMW AG BAMXF, these automakers might get their hands on the batteries. In that case, will the battery technology provide an edge to NIO? Nonetheless, we cannot be completely sure if the company is actually purchasing batteries until more details are unveiled.

Is NIO Geared Up to Challenge Tesla?

While NIO is set to bring ET7 into the market, the luxury sedan will face strong competition from Tesla’s China-made Model 3 and Y. Tesla claims the lion’s share of China’s flourishing EV market, riding on the high popularity of Model 3 SUVs and solid production prospects in Shanghai Gigafactory. Last month, Tesla also secured a green signal to sell Shanghai-made Model Y in China. With Tesla being a bigger and more established brand, and riding on huge popularity of Model 3 and Y vehicles, we don’t believe that NIO’s ET7 will pose a major challenge to Tesla’s EVs. As it is, Model 3 and Y are less expensive options that are available for around $36,800 and $52,000, respectively, compared with NIO’s ET7, which will anyway release a year later. As such, Tesla seems to be continuing to dominate China’s EV market.

Coming to NIO’s autonomous technology and BaaS service, could they be game changers?

In comparison to NIO’s NAD technology, Tesla’s autopilot deploys 1.2MP cameras. Also, while NAD makes use of LIDAR sensors that are considered to be the soul of driverless technology, Tesla’s CEO Musk finds the same quite unnecessary, which has resulted in a big debate among many industry watchers. Additionally, Tesla's two-chip FSD computer at 144 TOPs compares unfavorably with NIO's four NVIDIA chips capable of performing 1,016 TOPS. William Li claims that the firm’s computing platform, Adam has seven times more computing power than Tesla’s FSD. NIO further has an edge in this arena as it plans to offer driverless solution on a monthly subscription basis unlike Tesla, wherein one needs to buy the driverless solution. This would not only result in a recurring stream of service revenues for NIO but also lower the entry price to purchase a car. 

Coming to its solid state battery technology update, if NIO is actually working on manufacturing the 150-kWh battery pack (chances of which are slim) or is in an exclusive agreement with some supplier, then things may get more optimistic. In that case, NIO will offer a range of more than 600 miles. This is higher than Tesla Model S’ range of more than 400 miles, which is the maximum range offered by any Tesla car.

NIO’s battery swap technology provides a clear edge to the firm over peers. Management claims that a battery pack can be replaced in the vehicles in about three minutes. The technology, which is part of NIO’s BaaS strategy, helps in saving time while charging an EV and alleviates range anxieties. It should be noted that the company has completed more than 1.5 million battery swaps till now.

All in all, while a lot is going in favor of NIO, which currently carries a Zacks Rank #3 (Hold), the company is a relatively newer and smaller brand than the EV titan Tesla. Until there is more validation about NIO’s ambitious goals, it’s not very likely that the firm can pose serious challenge to Tesla on its home turf. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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