Nio could be the biggest threat of Tesla – NIO (NYSE: NIO)



On Tuesday, I detailed my initial thoughts on the 10K deposit of the Tesla Electric Vehicle Giant (TSLA). One of the things I have not really touched on is the company's overall results and its forward-looking vision, particularly with respect to some very interesting competition. Today, I am here to discuss the biggest threat facing Tesla. It is the Chinese manufacturer of electric vehicles Nio (NIO), a company that investors should really monitor in 2019.

Nio launched an IPO in September 2018 to raise funds for future growth. The company launched its first electric vehicle in volume, the 7-seat SUV ES8, at an event held in 2017, with deliveries starting in June 2018. In December of last year, it has launched the five-seater SUV, the ES6, whose deliveries are expected to begin in the first half of this year. The following image shows where these two models stand in the competitive landscape of BEV-SUVs in China.



(Source: NIO IPO prospectus, see here)

Nio will announce its full fourth quarter results on March 5, but we have some idea of ​​how the situation is going. The company delivered close to 8,000 units in the last quarter of the year, crushing its forecast for vehicles, which is well above the 3,300 units delivered in the third quarter. The company has clearly exceeded its target of 10,000 units for 2018.

Regarding the next report on the results, the company should inform us not only about its forecast for 2019 regarding the ES8, but also about the current state of orders for the cheaper ES6 . For reference, the street currently expects the NIO to generate about $ 2.5 billion in revenue this year, compared to about $ 660 million in 2018 (last year not yet final) . This may not sound like much, but you must remember that the Chinese production company has a significant competitive advantage over Tesla, as CleanTechnica points out:

For this last part, NIO can beat the price of the Tesla X model. It starts at 448,000 yuan (about $ 68,000) in China, against $ 79,500 (before incentives) in the domestic Tesla market. The battery rental contract will also give access to 3 minute exchange stations. Considering that the Tesla X model starts at 836,000 yuan ($ 127,108) in China (after tax at import), you can see how ES8 has the advantage.

Now, the trade war between the United States and China is under way and, even though the negotiations went well, the March 1 deadline for the tariff is fast approaching. My readers know everything about Apple's problems (AAPL) in China and Tesla is also seeing a major impact right now. In Tesla's 10K ranking, we found the evolution of revenue on the company's second-largest market, the graph below showing the last two years.



(Source: TeslaCharts Twitter, seen here, via the company's deposits)

Today, Tesla's year-round figures in China do not look so bad: they went from $ 2.027 billion in 2017 to $ 1.757 billion last year. However, as you can see in the graph above, in the first half of last year, we recorded revenues of more than $ 500 million a year, which made the situation much more difficult for the first half of the year. semester of this year. Since Nio's deliveries of ES8 did not start until late in the second quarter, Tesla did not have any major competitors at that time.

By 2019, Nio will have two models to go to Tesla, which will likely further reduce Tesla sales in this region. Nio has raised more than half a billion dollars to finance this growth. Do not forget that all of Tesla China's revenue in recent years has been generated by high margin Model S / X units. Tesla's decision to eliminate the 75 kWh versions of the S / X will also hurt sales, further separating Tesla from Nio.

This quarter, Tesla is starting to deliver model 3 units to China, but, like the S / X, they are facing a major price hurdle because of the tax situation detailed above. Tesla recently inaugurated a new plant in Shanghai to contribute to the situation of Model 3 and is currently planning to produce 3,000 vehicles a week by the end of the year, a very ambitious schedule. If Tesla does not reach its goals, which has caused her a lot of problems in the past, she loses a major advantage over Nio, who is expected to launch her ET7 sedan next year.

In the end, those who monitor Tesla should also monitor what the electric vehicle manufacturer Nio is doing in China. The Chinese company has done well so far with sales of its big SUV ES8 and will launch in the coming months its smaller model, the ES6. At a time when the trade war is hurting Tesla as well, Nio's advantage over the price seems to want to start eating Tesla's lunch. With China now Tesla's second largest market, Nio's growing threat could do enough to make a difference. As noted below, Nio's shares generally traded between $ 6 and $ 8. Investors wishing to buy should therefore see if we get another setback to the lower end of this range.



(Source: Yahoo Finance)

Additional Information from the Author: Investors are always reminded that before making an investment, you must exercise your own due diligence for any name directly or indirectly mentioned in this article. Investors should also consider seeking the advice of a broker or financial advisor before making any investment decisions. Any element of this article should be considered as general information and not as a formal investment recommendation.

Disclosure: I / we have / we have no position in the actions mentioned, and we do not intend to initiate a position within the next 72 hours. I have written this article myself and it expresses my own opinions. I do not receive compensation for this (other than Seeking Alpha). I do not have any business relationship with a company whose actions are mentioned in this article.


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