Chinese electric car company NIO (NIO) held its first ever “Power Day” presentation in Shanghai, China on Friday last week, aiming to gin up investor interest in its “charging post, supercharging post, battery swap station [and] mobile charging car” charging services — as opposed to its core business of, you know, selling electric cars.
But while the nominal purpose of the event was to provide information to answer questions that customers and investors might have, in actual fact, NIO’s presentation raised almost as many questions as it answered.
In a report on Power Day, Deutsche Bank analyst Edison Yu hit all the highlights. Since beginning to offer the service, NIO has conducted nearly three million “battery swaps,” replacing discharged batteries in customer cars with freshly charged batteries. 29% of its customers are located within a three kilometer radius of one of its swap stations — and the company hopes to grow that number to 90% by 2025.
NIO also advised that it is accelerating the rollout of new battery swap stations, so as to make that 90% number attainable. From 308 stations in operation currently, the company initially planned to grow to 500 stations this year — but now says it will increase its target to 700 stations by the end of this year. Furthermore, the company intends to build 600 new battery swap stations each year, for the next several years, reaching 4,000 stations by 2025 — of which 1,000 stations will be located in foreign countries.
“But wait!” you say. Doesn’t NIO’s 4,000 station-target in 2025, minus its 700 target for the end of this year, equal 3,300? And if NIO is building only 600 stations annually after this year, shouldn’t it take the company five-and-a-half years to go from 700 stations to 4,000 stations? And … doesn’t five-and-a-half years from 2021 imply that the company won’t reach its 2025 goal before mid-2026?
And the answers to those questions are: “yes,” “yes,” and “yes, it certainly does seem to imply that.” Nevertheless, Yu seems to be taking NIO’s statements at face value, and doubling down on his “buy” rating and $60 price target on the stock. (To watch Yu’s track record, click here)
But that’s not the only question raised by NIO’s Power Day revelations.
In fact, probably the most important question investors may have is this: Leave aside the 3,000 stations NIO wants to set up in China. Why is NIO planning to build 1,000 battery swapping stations outside of China, seeing as currently, the company doesn’t actually sell any electric cars outside of China?
NIO didn’t directly address this question on Power Day. But the company is known to be planning an international expansion in the future — and in particular an expansion into Germany. And in his note, Yu highlighted a recent LinkedIn job ad posted by NIO, seeking to hire a “General Manager of NIO Germany… to lead its business development in [that] country.”
Presumably, NIO is planning to begin selling EVs aggressively, in Europe and probably in other countries as well — and hopes to sell so many EVs internationally that by 2025 (or, you know, mid-2026) NIO will need to site one in four of its power stations internationally just to keep up with demand.
Overall, NIO has a rare bullish outlook according to the Street. Over the last three months, NIO received 9 ‘buy’ ratings with no Holds or Sells, — giving it a Strong Buy analyst consensus. Meanwhile, the $64.22 average analyst price target translates into ~40% upside potential from the current share price.
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.