Interesting article about the car. Should we be worried about...

Interesting article about the car. Should we be worried about the battery?


Nio, the ‘Chinese Tesla’ that has electrified investors worldwide is on the march.

When William Li, the founder and chief executive of Nio, decided that the electric car company’s mission statement should be “To shape a joyful lifestyle”, he probably wasn’t thinking about Britain’s twentysomethings happily punting on its share price to stave off boredom in lockdown.

Nio, based in Shanghai and a relatively small company by revenues, making about 200 cars a day, has lofty goals, not least helping to tackle climate change by shifting the world away from internal-combustion engines.

However, it has emerged, with a New York listing, as one of the most popularly traded stocks in Britain, boosted by the commonly expressed prediction that the company is going to be “the next Tesla”.

According to Susannah Streeter, senior investment analyst at Hargreaves Lansdown, Britain’s biggest stocks platform: “Nio is the second-most popular overseas investment on the HL platform and since the start of the year has been in the top ten overall.”

AJ Bell, another large investment platform, said that it had handled more trades in Nio in the first week in January than in all of December. Markets.com has reported “very high interest” among its clients.

The stock also seems to be one of those prospective world-beaters that catch the imagination of younger, novice investors: those who have never experienced a full-scale bear market.

IG, the spread-betting group, said that Nio was its second most popular stock globally behind Tesla, especially with younger investors: “We’ve seen a huge amount of interest in it and other electric vehicle stocks over the past 12 months, particularly among the new, younger cohort of clients.”

Etoro, a fast-growing investment-cum-social media platform popular with young people that claims to have about 1.7 million registered users in Britain, said that Nio was its most frequently traded stock in December.

Some investors know very little about the company, let alone take a considered view about its prospects. One 26-year-old quantity surveyor, who asked not to be named, told The Times: “My mate told me to invest in it. He’s bang on it. I’d actually never heard of it before. It’s the Chinese Tesla.

“It’s tipped to nearly double by the end of the year. I’m just waiting for it to make me a millionaire.” This was said tongue-in-cheek, but there is no denying that investors hope to make a profit.

Social media sites are full of chat between millennials relating their investment experiences. One said that after making profits from bitcoin, he was shifting into Nio having taken advice from a 19-year-old friend on Tiktok: “He really knows his shit.”

This kind of talk is grist to the bears and sceptics who mutter about elevator boys in 1929 Manhattan offering share tips just before the Wall Street crash. Nio’s popularity, they argue, is a classic example of a frothy market, with some stocks in bubble territory.

Yet to portray Nio as a stock purely puffed up by naive novices would be wrong. The company has fans among some of the most admired and successful technology investors in the world.

James Anderson, manager of Scottish Mortgage, the FTSE 100 investment trust, sang its praises in a webcast with his investors last week, arguing that it had emerged over the past year from being merely one of perhaps a hundred electric car businesses in China to being “probably the clear leader”.

Nio shares reflect that progress, rising 28-fold from a low of $US2.11 in March to more than $US60 today, valuing Nio at $US96 billion ($125bn) – more than General Motors at $US74bn, or Ford at $US40bn. According to Scottish Mortgage’s most recent filings, its stake in Nio was worth £857 million ($1.5bn) on November 30.

If it holds the same number of shares, that will be more than £1bn today. That is starting to look meaty even against Tesla, which went up by a mere 1000 per cent in the same period since March. The Scottish Mortgage stake in Tesla was worth more than £2bn that last time that it reported.

“Tesla way underperformed Nio last year, so perhaps we should ask Mr Musk [Elon Musk, the chief executive of Tesla and now the world’s second richest man] why he’s doing so badly,” Mr Anderson said.

Underpinning the confidence of investors is some eye-catching engineering. The latest Nio models seem not only to be ahead of the offerings from traditional car companies but also ahead of Tesla itself.

Nio’s 70 kilowatt-hour battery and 100kwh battery packs make its cars capable of travelling up to 450 miles (724km) on a single charge, soothing “range anxiety”. The company claims to be close to producing packs of denser, solid-state batteries to replace the ubiquitous lithium-ion batteries and push ranges to more than 960km.

Then there is its innovative approach to recharging. It has rejected the hugely expensive motorway service station superfast chargers being put in by Tesla, which still take 20 minutes to re-fire its cars, and has opted instead for battery-swapping stations, which reduce the stop time to only five minutes.

Nio also is turning out cars with “Level 2” autonomous capability as standard, a level of driver assistance – automatic braking, acceleration, lane guidance – only a step before the machine takes over at the steering wheel.

In a recent report into the electric vehicle market, Jefferies, the stockbroker, cited range, connectivity, autonomous driving and charging solution as the unique selling propositions of Nio in an industry divided between legacy companies and the wannabes.

“Wannabes’ success may hinge on legacies’ inability to respond,” it concluded. That included the way to market. The legacy companies rely on outmoded dealership showroom networks. Nio is selling on the internet and is marketing through pop-up shopping centre “Nio spaces”.

The excitement around Nio is that it is coming soon to try to crack the European market, where electric adoption is accelerating. Tesla is proving that the new wave can succeed, delivering the best electric car sales in Britain, ahead of BMW, Nissan and Renault.

So the company’s prospects are immeasurably sunnier than they were last March, when, as Mr Anderson concedes, the company was in “severe danger”. A $1 billion rescue by the provincial Chinese government of Anhui, where the vehicles are manufactured, helped to put the company on a more solid footing. Even so, the valuation remains stratospheric by conventional measures.

Nio is lossmaking, recently reporting a $US154m net loss for the quarter to September, although this was down by 59 per cent from a year earlier and down by 11 per cent on the previous quarter.

Annualising that quarter’s sales puts Nio on a multiple of 36 times annual revenues. To put it more starkly, the company is valued at $US2.19m for each car it has produced in the past year.

The “buy” case is that the lesson of digitised, globalised, brand-driven capitalism is that a very small number of winners – Apple, Google and Netflix – grab all the cake. In carmaking, Nio, founded in 2014, might just be that winner in ten or twenty years’ time.

Nio, which buffs up its brand via its Formula E motor racing team, as well as clothing merchandise, brought out its latest model this week. The ET7 is a £60,000 car that goes from nought to 62mph (99.8km/h) in 3.9 seconds and has a claimed range of 435 miles (700km).

That puts it head-to-head with Tesla’s forthcoming Model S Plaid, as well as traditional marques, such as the BMW 7 Series and Mercedes-Benz S-Class. Nio, for now, is roaring ahead, whether or not investors look under the bonnet.

The Times