🔴 NIO ≠ Tesla of China 🇨🇳 Can ARK Invest be convinced?
No NIO ($NIO 蔚来) is not the Tesla ($TSLA 特斯拉) of China! Hey guys, I hope you had a great weekend and I’m going to do this video mainly for two reasons: First reason often hear this quote. “Well, NIO is just the Tesla of China”, and I think this quote is quite of a lazy Analogy and the recent articles and news floating around about “NIO can not Grow into their valuation” here I think they’re just incorrect! So in this video, once again, I’m going to summarize my views on NIO and also reflected from a viewpoint as a Tesla bull, because I’m also invested in both companies. Second of all, you heard me teasing about my opportunity to speak to ARK Invest about NIO And in this video, I’m actually going to show you what I pitched to ARK Invest and why I think that they also should consider NIO as an investment. So by the end of the video, you should know why NIO is not “the Tesla of China” And also you should know more about my pitch to ARK Invest and whether or not I think they’re going to invest in NIO. Now, this brings me straight to the point that most outsiders actually view NIO just as a copycat of Tesla and they’re being criticized for actually just swimming in the slip winds of Tesla And that stock prices actually quite correlating here And that NIO stock is only up because of what Tesla has been doing And I frankly think this is not the case. For instance, in the last market correction we’ve seen that actually NIO has been doing quite well and Tesla because of other reasons has been performing quite less well So the stock prices in my views are not directly aligned and we can see more and more that the differences between those two companies are appearing So speaking of what are actually the differences here in my views, it’s mainly the business model Tesla is fully vertically integrated, whereas NIO is becoming this aggregator business model and a platform business And there has been a recent Tweet by Elon Musk, which really sums it up quite nicely, how to think of Tesla So Elon tweets that Tesla is best understood as a collection of about a dozen startups, mostly in serious, increasingly in parallel, every product line in new product systems was invented instead of playing chess with the same pieces as everyone else, we create the new pieces And I love this tweet and I’ve wrapped my heads around it and thought like what would actually Li Bin, the CEO of NIO tweet about NIO in the same way? So I would say that Li Bin would tweet that NIO is best understood as a collection of about a dozen startup, mostly in series, increasingly in parallel So, so far as Tesla – and then every new business model integrates into a user centric network ecosystem And instead of playing chess with new pieces, we define the rules of the game with an unfair advantage! So there you see where I’m going I think there are quite distinct differences in the business model and most comes down to the vertically manufacturing approach and many criticized NIO for saying that well, NIO not owning their own manufacturing is a NO-GO. Whereas, I’m particularly bullish on exactly this And I think that quite unique way of approaching this industry and market here And this also comes back to the initial trigger, why I was able to speak with ARK Invest. First, if you don’t ARK Invest, go to their website, subscribe to their emails and podcasts And also look at what Cathie Wood, the founder and Chairwoman of ARK has to say about innovation and about the markets and Tesla. I really do love ARK Invest They’re so inspiring and their research and content they put out there is extremely valuable. And I also have been in contact with some of their team I’m exchanging some views on Chinese stocks. And speaking of that, I have to say clearly that I have no business with ARK Invest I’m not invested in our funds either It’s not possible in Europe anyways, and I’m also not approaching ARK or representing any companies that I’m covering here on my channel I’m just a retail investor uncovering my story here and sharing it with the world. And this way I was fortunate enough to get a call with ARK invest here So initially I had a Twitter conversation with Sam Korus One of the ARK analysts that is covering Tesla and he’s even followed by Elon Musk on Twitter. So Sam is a cool, brilliant guy and has also appeared on Gali Russell’s HyperChange, a YouTube channel, which I look really highly up to. And well, anyways, on Twitter, he has published a chart which should show that Tesla is doing better than Chinese EV manufacturers when it comes to production and scaling And in my view though, the chart actually proofs the contrary! I can make the case that NIO is actually growing faster than Tesla did So I went ahead and replied to Sam that if you would actually add my business case projections about NIO on this chart, you would be able to see that according to my NIO napkin business plan NIO should be outscaling Tesla the same age and this also gets supported by the fact that for this year projections, we already see that NIO will almost certainly hit the 40K deliveries I’d rather take that for granted actually. And in this case, this is already higher than what Tesla did back then at the same age as NIO did Furthermore, I got hold of it, chart for NIO next year’s planning, which is rumored to be floating around with new suppliers and briefing them for
actually 90K deliveries next year, which is actually even 5k or 5% higher than my own business case projection. So with a very high likelihood, we can actually make the case here that NIO is scaling faster than Tesla And I would even say that it will continue to do so in the future So based on my replies, Sam was kind enough to jump on a call with me to discuss what ARK may be missing about NIO and I happy to take such a call, but before I’m going more in detail on that I have to say that I’m not going to talk much about what in detail we have discussed because I cherish this relationship and it has been a private conversation So I didn’t do any recordings and thereby I want to treat this as a, you know, a confidential thing here So I can definitely not say what ARK is going to do with the information that I have presented to them and how they may actually choose or decide on NIO as a stock investment later on All in this video is only for informational purpose This is nothing where you should make investment or trading decisions upon And in anticipation of the call, I have actually been working together with my commenters on Patreon (Patreon.com/DONGXii) So thank you guys very much to compile a quick pitch deck, which summarizes my, or actually our views on NIO and which I ultimately have presented to ARK So let’s take a look at what I have pitched here The first slide is about how I like to think of NIO as a platform and aggregator business that is quite unique in the industry And in my view is actually quite disruptive! And part of the reason why I think that besides Tesla, this will be the dominating business model that is going to succeed as it scales fast, requires less capital and has enormous upside on margins and profitability beyond manufacturing This platform approach has enabled NIO to focus on what they do best and which makes them unique and having an advantage against EVV latecomer, legacy auto, copycats, and in some aspects, even against Tesla. So, NIO life and NIO community, which is reflected in the numbers such as extremely high customer to customer referral on sales Industry leading customer satisfaction rates and a first as a Chinese company: unique global and premium brand, which allows for an excellent high margin positioning in the market So it’s the first time for a Chinese company and worth the investment in NIO Houses and NIO Life, because now it’s possible for them to monetize on this intangible asset and a brand in the future And it’s the first Chinese company that I know of that managed to position against their industry, leading Western peers in this case Mercedes, Audi, BMW And that has an incredible appeal among a foreign audience And I do think today, analysts do not fully grasp the big picture here with the brand and what it is actually worth. There is however, a crowd of NIO, the retail investors, the NIO Gang here on this channel that has gotten a sense of it And which is also reflecting a strong retail basis in NIO stock, which I think is really important and something that only Tesla so far has successfully done as well Then my next slide was about Battery as a Service (BaaS) And I know this is a challenging topic among – well Tesla bulls, and I have made several videos about it And I actually think that even Tesla may have a second look at battery as a service. And in general, I have a more pragmatic view on this topic as an investor And I don’t care so much about technology and this fight against supercharging and I can totally see the technology is in effect debatable, and I can see why some people opt and say that supercharging is and will be sufficient. However, what I think is the bigger argument for BaaS is in fact, the industry disruption and the business model that it brings to the table So as I have pointed out in previous videos, BaaS will effectively become an unfair, competitive advantage and soak in the entire industry expanding the total accessible market (TAM) So this means increasing the market that NIO can actually access and sell the cars to. And adding around a 10% revenue line that yeah, manifests NIO’s leading role in China as a EV brand The business model enables them to bring down the purchase price and the initial upfront costs. So thereby the market grows, it’s tapping into this McKinsey study and preferred market rate of around 200K to 300K RMB sales price It clearly shows the Chinese government backing and well it’s becoming a new national standard And this is always like when the Chinese government coming in and producing standards, this is powerful And in what, in some ways, even kind of a protectionism and a way of creating national heroes because – well other current manufacturers can choose to either opt in and do the same thing, or they will have disadvantages for instance, when it comes to EV subsidies And this has become quite apparent with this new regulations. And yes, when we talk about the vertical integration, NIO doesn’t have the battery know how and the vertical integration and bringing Cost of batteries as Tesla has
However, what NIO is doing here with this business model, innovation is they can actually start and depreciate the battery assets on an accounting level and thereby forward those cost savings actually on the battery to their consumers or or take them to actually increase their margins Then it has several more benefits, for instance, for robot taxi fleets, for which the swapping will be a thing we see already in China taxi fleets, starting to adopt battery swapping also for this purpose, as well as, you know, battery degration and all those other benefits that are getting solved with the swapping in contrast to only talking about charging here and in contrast to what Tesla has faced, why they didn’t do battery swapping is because – well the consumers told them, well that they’re not interested in that, but in China, we have the approval of the consumer with more than 800,000 swaps and 50% penetration with NIO On the next slide I made the point at due to the nature as an aggregator and platform business, NIO has still managed to get hold of important assets and intellectual property (IP) in the area of digital service offerings and software So this is coming back to the quote to Elon Musk here and saying that well, similar to Tesla, NIO has several business lines and startups running in parallel paying into a holistic ecosystem and should be a reason for treating NIO for what it is: A tech and software company on top of a car brand and not just a pure OEM play here. So NIO particularly in China is on the verge to become a leading backend and software architect in the area of automotive e-commerce For instance, I think they will be introducing a second hand car platform in the future They are leading in the area of digital assistant in combination with artificial intelligence, with NIO power cloud and made huge steps into battery energy and power management via cloud services and are continuously improving on autonomous driving and their software capabilities for the NIO cars, updated over the air software updates And all of it is actually award winning here So this is really outstanding as a software business here for NIO On the next slide, I was stressing, the point that NIO autonomy approach is not really well covered so far despite on this channel So NIO could surprise analysts in our approach towards autonomy and yes, NIO is not a leader in full self-driving (FSD) And the current NIO pilot is nowhere near to the Tesla autopilot, but NIO has two compelling arguments for being a great hedge for the bet on autonomy The first one is that NIO has set up a preferred partnership with Intel Mobileye that goes quite undercover to be honest, and could be really huge! Essentially NIO is taking a similar approach to Tesla. So vision-based and data based, and yes, NIO is not a leader in a miles collected today, but their partner Mobileye, I could actually catch up and even exceed Tesla by 2025 in terms of miles collected. According to my own calculations, based on the ARK Invest Tesla business case and statements by the MobilEye CEO And although I still see Tesla leading the way here, particularly when it comes to the quality of the data still, this partnership could give new access to the data collected and because their preferred partnership role in disregard meaning that they are able to work with Mobileye directly on the tech stack and the chip sets for L4 autonomy platform, which will be a great benefit to NIO And as outlined before NIO could actually become a broker of autonomous vehicles that are getting deployed in a Mobileye fleet. And in my views, this will be vehicles dedicated for this purpose and by NIO So actually a car and EV platform purposefully designed for this approach and thereby solving some of the weaknesses that other OEMs have when it comes to autonomous, meaning the chip set and tech integration, as well as the ability to process the data. Second of all, I think particularly in China, this solution could be working due to favoring Chinese companies in terms of the licensing, accessing GPS and permissions, granted to local entities This is often getting overlooked when it comes to China China usually introduces such kind of regulations as some, you know, low key barriers to entry And in order to protect their home-brewed startups and companies and foreign Western manufacturers always will have a disadvantage on this setup, even Tesla, which has great government relations and a wholly owned foreign enterprise in China, but they will always be affected to that and let’s call it what it is it’s protectionism And this is the way how China has grown their home-made tech startups so far So in summary, NIO could be a great hedge here If you focus on China for autonomy, with this unique partnership And once again, a unique advantage that cannot be copied by others due to the home-brewed status. And then next slide on valuation. In my view, NIO is fairly valued in contrast, and as outlined in my videos about Li Auto ($LI 理想) and Xiaopeng ($XPEV 小鹏), I do see that NIO is fairly valued in the market and with a huge upside based on a growth projections and also those aspects that have been outlining about their business model. And at the same time, I still like that NIO is a bit discounted towardsTesla So they’re not trading higher than Tesla on a P/S ratio here
And I think it’s fair to do that because of well, Tesla has advantages in FSD development They have higher margins due to the vertical integration, as well as they already are at a later stage in their startup cycle And so with the roughly 20 billion valuation here of NIO, it still has enormous room to grow. Based on that, I’ve been outlined also with Tesla as a role model here, and a catalyst towards the valuation of such companies that not only have the h ardware, but also the software business and yeah, the road to autonomy here And as shown, I do think NIO will keep growing, going fast It will be actually faster for profitability as well, and I think they can improve on the margins Not only due to the manufacturing part here but also on the service and all those businesses and services around it, in that ecosystem So this valuation in the competitive environment here gives me the views that NIO is fairly valued and actually rather cheap, or did that other ones LI Auto and Xiaopeng are overvalued And this is a great thing to know as an investor, because that shows me that I’m kind of betting on the right horses here with Tesla and NIO And NIO in my view has to only complimentary business model here to Tesla and can actually catch up or even exceed that growth! And regarding the vertical integration aspect, I don’t see it as an issue and rather I would spin it into an advantage and this would be the reason why they’re growing fast and also due to the fact that NIO suppliers can actually sell to other companies while NIO is now just managing those suppliers NIO can enjoy cheaper sourcing than Tesla would have at the same point in time of their life stage And at the same time, NIO still holds the most important manufacturing Intellectual Property (IP) and also software IP And I think this is also the main reason why Bailey Gifford and also Tencent also invested in NIO on top of investing in Tesla because they see that those two things can actually be working together. Now, is this enough to convince ARK Invest here? Well, I don’t know their reasoning so far, and I can only assume that they have mainly invested in Tesla also due to the fact of the vertical integration and the high margins there And that this is one of the biggest drivers why they say they’re going to, you know, bet on this winning horse here. On the other hand, and to be frank, I do think that ARK Invest has a little bit of a blind spot of the black box China, to be honest, and what’s going on in the EV space there And they may have simply not been aware enough of these distinctions I’ve just outlined between Tesla and NIO And that before NIO actually made up its latest run in the stock price So I do think, well, maybe the limited understanding of NIO and the questions about NIO business model may have pushed ARK to stay sidelined on NIO and well usally ARK is actually at timing, the markets, as you can see with the recent buy of Tesla during the correction But maybe this time ARK have just simply missed out on a good entry point on NIO, not having the intel Not fully understanding where NIO is going and maybe they have been too occupied thinking whether or not the move into NIO, maybe a wrong signal and may be confusing. Anyways, I’m really happy that I got this opportunity to speak to Sam and to ARK Invest and our work continue to stay in touch with the team if they want my information and, you know, having frequent exchanges about, well, what’s NIO doing what is the market in China doing? I hope they are up for it! And I would definitely use it as a way of well, you know, pitching what I think is the right move to do, but also at the same time trying and reconfirm my personal investment thesis on NIO so far, but as outlined in this presentation and pitch, I do think that it makes the case for investing in both companies Because to point to where it comes down is that actually both companies are massive innovators in their space with a really good timing in the markets right now, and also a huge vision! So that is for both there’s room to grow And so for me, this is actually the winning recipe in the end, and I actually have to disagree with another YouTuber that I highly value: “Dave Lee on Investing”, which previously has stated this “Until these OEMs rollout, a supercharging network, as good as Tesla I think Tesla actually has no competition, but I think ample supercharging and this long distance travel issue is for space And I think there’s also other basis or things that these OEMs need to do For example, they need to meet the cost similar with Tesla and the performance and range also needs to be similar as Tesla or there’s no really competition either And lastly, these OEMs need autonomous driving software that needs to work as good as Teslas. Now, when you put all of these things together, Tesla has accured what I call a whole solution and this whole solution. Now, when you present it side by side, the Internal Combustion (IC) experience is a better whole solution And in my opinion, Tesla is the only game in town that actually has a whole solution that’s offering to consumers.” So contrary to Dave, I do think there is actually this second company around that company is NIO
They’re building this ecosystem They’re building it up from a user centric perspective. They’re scaling fast As I pointed out a scaling faster than Tesla, in some regards The EC6 will even be faster on the roads than Tesla Model Y , which is mind blowing if you think about it And I do think that makes a great case for being invested in both companies So let me know in the comments below, what do you think about my pitch? Do you think it was convincing, do you think ARK may consider NIO in the future or would you disagree and say, well, that wasn’t convincing at all? I do think that ARK is actually going to pass on NIO also in the future, and maybe you’ll regard Tesla as the better investment. Anyways, I’m interested to hear about it. I will give you more frequent updates. As soon As I see it in the ARK email trading confirmations that ARK is possibly taking a position that will be really exciting to see. Otherwise, as far as I don’t see any trends and major fundamentals shifting from NIO with my investment thesis here, I will stay invested and keep it in the long run and also – yeah see how they can execute on this big vision and see if they can unlock the full potential and the value of this company So thank you guys for watching let’s hope for a good week in the markets and see you in the next one