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Since the end of May, the share of Chinese car manufacturer NIO, Inc. ($NIO) has only been moving up. Constantly, the stock was slightly above the Simple Moving Average 38 (SMA 38) – average for the past 38 days – and eventually even managed to break away from it. However, at this point the $29,- barrier appears to be acting as a resistance to the course, causing the share to barely move this week.
2021: Europe is the next chapter
Recently, NIO announced that it will be represented in major global markets by 2023/2024. In Europe, the car manufacturer initially plans to compete in individual countries. Where it previously did not reveal much about its market strategy, it is now slowly being exposed to certain countries and strategies.
The expansion targets were published yesterday and appear to be right on time. NIO – which already sells three different electric SUVs in China – wants to enter the European market in the third quarter of 2021. The strategy is to initially use the Norwegian market as a starting point, because the country has a fantastic infrastructure and the government is highly positive about the transition of electric cars, which has led to more demand for electric cars by the Norwegian customer.
The benefits of Battery as a Service (BaaS)
NIO wants to be able to offer its models at favorable prices in Europe. So far, the startup offers three models in China: the ES8, ES6 and EC6. In addition, NIO compiled a “Battery as a Service” (BaaS) package this quarter, which allows customers to purchase a vehicle without a battery. This makes the vehicles less expensive than most of its competition. This is possible because the batteries are rented including a battery service and won’t be included in the purchase price.
At the end of 2019, NIO informed the world that the first network of battery exchange stations had been realized. At the beginning of 2020, eight exchange stations were built and operative, spanning more than 1,000 kilometers on the G2 highway between Beijing and Shanghai. Thanks to these stations the batteries of NIO’s electric cars can be replaced in less than three minutes. The company has an expansion plan for a second corridor with more stations between Beijing and Shenzhen. According to its latest information, NIO has currently set up 143 exchange stations in 64 Chinese cities.
A market that China is currently dominating
In the middle of this year, the Chinese electric passenger car market emerged from years of decline. After a sustained decline in car sales due to a cut in government subsidies and exacerbated by the effects of COVID-19, consumer confidence returned in 2019. The latest sales figures tell us that the total electric car sales were up year on year for the second consecutive month by August.
The recovery is the latest turn for a mundane sector that has seen spectacular growth over the past decade. In 2011, China accounted for just over 5% of global electric vehicle sales. At the beginning of this year – even during the recession – stocks of companies like NIO had risen to over 50%, making China the largest market for electric vehicles.
The accelerated expansion plans seem to be related to the positive business figures for the second quarter of 2020. Analysts agree that the balance sheet is much more positive than initially thought. Compared to the same period in 2019, sales volumes increased by 190%, while sales grew by almost 150%. These figures have boosted shareholders’ confidence and it seems that many of them remain confident in a further rise in the share.
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