NIO Day reveals plans to compete with Tesla

NIO Day was exciting for NIO car enthusiasts as well as for NIO investors. JPMorgan expects the EV share of the total China car market to quadruple to 20% in 2025 from under 5% in 2019. The costs of producing EVs and traditional vehicles will reach parity by 2023, driven by lower battery costs.

NIO CEO William Li projects the company will reach an annual production of 150,000 vehicles by the end of 2021. The EV Car maker has also set a long-range goal of 300,000 annually. 

NIO Achieved New Records for Monthly and Quarterly Deliveries; Annual Delivery Reached 43,728 Vehicles in 2020. The following are the delivery details:

• 7,007 vehicles in December 2020, increasing by 121.0% year-over-year
• 17,353 vehicles in the three months ended December 2020, increasing by 111.0% year-over-year
• 43,728 vehicles in 2020 in total, increasing by 112.6% year-over-year
• Cumulative deliveries of ES8, ES6 and EC6 as of December 31, 2020 reached 75,641

There were exciting announcements made about the upgrades to the Battery swap technology, a solid-state 150KWh battery coming soon, the new ET7 Sedan and the updates on the Autonomous driving technologies.

William Li fires salvos at Tesla

William Li, NIO’s CEO took swipes at Tesla specifically the following:

1. The NVIDIA Orion microprocessor, fitted for autonomous driving has a computing power surpassing the total of 7 Tesla FSD computers.
2. The ET7 car will be fitted with eleven 8MP cameras, whereas Tesla uses 1.2MP cameras. The price is also less compared to the Tesla Model S.

NIO is now stepping out of the shadows and getting ready to dominate the EV market.

Battery as a Service

NIO launched the BaaS (Battery as a Service) model. This was to reduce the upfront cost the customer has to pay to purchase the vehicle. Then the customers pay a monthly fee for battery charging and upgrade. This results in recurring revenue for the company. This gives great flexibility for EV buyers. Battery technologies are evolving each day. The hazards of batteries catching fires are reduced with future releases. Instead of locking into a single battery pack, they can just purchase the car without the battery pack. Then pay a monthly subscription for the company. In case a new battery pack is launched, they can just upgrade it to the next pack.

Next generation Battery swap stations

Battery swap technology lets the customers swap their drained battery for a fully charged battery in 3 minutes. NIO has 177 swap stations. 1.49 million power snaps completed equivalent to one battery swap every 12 seconds

NIO upgraded the power swap stations. The Power Swap station 2.0 can accommodate 13 batteries giving a 312 daily swap capacity. NIO has a target of 500 Power Swap stations by 2021. 

On the NIO day 2017, William Li had a goal of 1100 swap stations by 2020. The progress is slow due to the capital intensive process of building swap stations. However the battery swap is at the core of NIO’s strategy of generating recurring revenues through subscription based services. The government of China is also rolling out subsidies for battery swap technologies.

Right now, when customers go to a battery swap station, there are personnel stationed there, who take the vehicle inside and complete the swapping process. The long term goal is to have the autonomous vehicle system take care of this process.

150 KWh battery

This battery will be a solid-state battery to increase the energy density by 50%. Through material and process innovations, the battery has an ultra high energy density. The solidification and hybrid electrolyte secure the cell safety. The battery also has a longer battery life and charging efficiency. This has been tested in NIO models.

• ES8 achieved a range of 850 km on a single charge
• ES6 achieved a range of 900 km on a single charge
• EC6 achieved a range of 910 km on a single charge

The upcoming sedan model with the 150 KWh battery will have a range of over 1000+ km. However, these claims will need to be validated.

NIO ET7 Sedan Car Details

With its sleek looks, exceptionally designed headlights, taillights and exterior, the 650 horsepower NIO ET7 is indeed ready for tomorrow. The interior has a second living room concept with its spacious design. The laminated all glass roof insulates against the UV rays. NOMI, the first AI in cars, continues to grow. It has the Qualcomm Snapdragon 3rd generation Automotive cockpit platform. ET7 has the following ranges

• 500 km with 75KWh battery
• 700 km with 100KWh battery
• 1000 km with 150KWh battery
• 0 to 100 km/h in 3.9 seconds

An ET7 will cost drivers about $84,000. It’s a luxury sedan. ET7 is available for pre-order on the NIO App. The ET7 Premier edition has the 100KWh battery.  The delivery will start Q4 of 2022. This is the drawback. That is still about 1.5 years away and EV technologies are changing leaps and bounds. Many EV players are entering the market. Tesla is in a solid position having piles of cash on its balance sheet. The competition is going to be huge.

Autonomous Technology Updates

NIO Pilot, the driver assistance system has been in production and logged 100 million km.

NIO is making the leap from assisted driving to autonomous driving. NAD (NIO Autonomous Driving) provides a safer and relaxed driving experience. NAD is a full stack platform software. The plan is to gradually cover use cases from expressways to urban to parking to battery swaps. 

NIO plans to offer it’s self driving solution as a subscription. That’s something even Tesla hasn’t tried yet and highlights how new EV makers, such as NIO, are trying to use software-like solutions to generate recurring revenues.

Aquila Sensing

Aquila is the NAD super sensing, which features the most advanced sensing units. It features the first 8MP high resolution camera. In comparison, the Tesla FSD has a 1.2MP resolution camera. It can detect objects in a longer distance with finer details. 

One other difference here is the use of LiDAR. Tesla on the other hand does not use LiDAR technology and uses cameras and sensors and a radar fitted in front for extreme weather conditions. Elon Musk even called the technology a crutch. NIO Capital has an investment in Innovusion, a leading developer and manufacturer of image-grade LiDAR sensor systems for level 4 and 5 autonomous vehicles and ADAS markets. Aquila sensing uses these LiDARS. The lasers emitted are safe for use. The LiDAR detects objects in glaring sunlight and fog, and also dangers like open manholes. 

The following are the hardware used by Aquila 

ADAM NIO Supercomputing

ADAM is the by far most powerful supercomputing platform. It has an ultrafast backbone computing network, which distributes the input from all sensors and vehicle system to every computer core. ADAM has 48 CPU Cores, and 68 billion transistors. ET7 will be the first production model fitted with NVIDIA Orin. It has a computing power of 1,016 TOPS surpassing the total of 7 Tesla FSD computers. 

NIO Stock Valuation

The shares outstanding are 1.6B. The expected revenue is $2.3B this year. But a lot of things have started to fall in place for NIO. The worst is over and the growth runway is ahead. Currently the stock is trading at 36 times the revenue. If the revenue grows 50% compounded over the next 3 years, that would be $7.7B. If we have a 20 multiple for revenue, the market cap would be $154B. Assuming there will be further dilution of shares and the share count be 1.8B, the price per share would be $154B market cap/1.6B shares outstanding = $96 per share in the next 3 years.