The Art Of Innovation

Don’t charge your battery pack, swap it

A key differentiating factor is its battery swapping technology, through parking docks where a robot can swap an empty battery with a fully charged one in only 3 minutes.

• Swap stations are compact (approx. 45m2) and designed to be fully automated.
• They use in-house chassis replacement technology based on >300 patents for precise positioning, rapid disassembly, and flexible deployment.

A computer on wheels

NIO is developing its autonomous driving technology equipped with Mobileye (Intel subsidiary) EyeQ4 processors and providing Level 2 automation.

• NIO Pilot, its proprietary Advanced Driving Assistance System (ADAS), provides >20 advanced driving assistance features (automatic lane changers, highway & traffic jam assistance, lane keeping, etc.) and over-the-air software updates.
• NOMI, its AI-powered in-car assistant, enables voice-activated & personalized services (e.g., driver identification & seat position adjustment, speech recognition, etc.).

An innovative manufacturing approach

NIO is leveraging on strategic partnerships, including Chinese state-owned automakers (JAC and GAC), as well as world-leading Tier 1 suppliers.

• Manufacturing agreements are in place with JAC to produce the ES8 (7-seat SUV) & the ES6 (5-seat SUV), and with GAC for the upcoming Hycan model (cheaper 5-seat SUV).
• The ES8 and ES6 each use over 1’700 parts from over 160 suppliers, including Bosh (brake boosters), Continental (air suspension), CATL (battery cells), etc.

Reinvent Strategic Business Models

Cash-intensive but with a solid backbone

NIO’s main challenge is its ability to secure enough funding to sustain its growth. Building a carmaker from scratch is no small task and requires substantial financial support before reaching profitability (see Tesla’s example).

• NIO averages $400mn of cash burn per quarter from operating activities.
• Technical issues also affected profitability, as 5’000 ES8 were recalled to replace malfunctioning battery packs last year (cause: design issue with a module pressing on a wiring harness & causing short-circuits).

Batteries becoming a recurring revenue stream

Battery swaps are source of recurring revenues. Users either take out monthly/annual subscription or access energy services on a pay-per-use basis.

• Subscription costs $140 per month, $1540 if paid annually, or $26 per charge (cheaper than refueling an internal combustion engine car at current 0.7$/L).
• 125 swapping stations are in operation, and 1’100 planned by year-end.
• The energy package includes access to battery swapping, mobile charging trucks, power express (on-demand pick-up and drop-off charging service).

Revolutionary sales channels

NIO created a network of innovative sales channels such as the NIO Houses (large showrooms >1’000m2), NIO Spaces (~150m2 showrooms), and NIO’s mobile app.

• There are currently 22 NIO Houses & 55 NIO Spaces.
• Buyers can pre-order vehicles through the NIO app, find charging stations or arrange for battery swap services.
• This direct-sales model improves margins by removing franchised distribution costs and lowering the number of physical point-of-sales needed.

Catalysts

• EC6 Launch. The EC6 (a sportier & more compact version of the ES6) should start first delivery in September 2020 and could attract new customers thanks to its new design, improved range (up to 615 km), and attractive price.
• New Battery. A new 100kWh battery pack is to be released in 4Q20, enabling existing car owners to upgrade their current battery packs (70kWh or 84 kWh) through a simple battery swap and a one-off payment.
• New partnerships. E.g. the upcoming JV with Beijing E-Town capital and the preliminary agrere.

Risks

• Subsidy Cut. While Chinese government recently announced its intention to not cut further subsidies on New Energy Vehicles (NEV) for this year, any policy change could harm EV sales in the short term.
• Raising competition in the premium EV segment. Several competitors are entering Chinese’ high-end EV market, with notably Audi’s e-tron, Mercedes’ EQC, or BMW’s Mini EV intensifying the overall competition.
• Factories shutdown. NIO currently relies only on its agreement with JAC to produce its car at its Hefei plant, putting the company under threats of extended factories shutdowns caused by the Corona virus.