Shares of NIO soared 28.72% in premarket trading Monday after the company reported third-quarter earnings results that beat expectations, as its vehicle deliveries and revenues grew 35% and 21.8% from a year ago, respectively.
The China-based NIO has been beleaguered by the slowing domestic car market, continued loss-making and some internal management issues.
In EqualOcean’s previous article about NIO, we expected the firm would boost revenue, slash operating costs and scale back losses to USD 339 million in the third quarter of 2019. NIO met our expectations closely, with higher-than-expected sales and general and administrative expenses slashed.
NIO’s rival Tesla’s shares were little changed, however, falling 0.1% after it began delivery of its first cars at its China Gigafactory on December 27.
In China’s premium EV market, NIO is the only brand that can compete with Tesla. NIO’s supposed domestic competitors, Xpeng Motors and WM Motors, claimed to be the next generation of EV brands and tried to take on Tesla – but they are still lagging behind NIO.
The average price of a NIO car is around twice as much as that of Xpeng and WM Motors models, while the average monthly car sales of NIO were twice as much as both companies in the past 11 months (all prices are after subsidies), according to data compiled by EqualOcean.
Positioning itself as the pioneer of China’s premium EV brand, NIO has proven the statement's validity from its market performance – only the Tesla Model 3 is in the same price and sales range as the company. It is perhaps hard to confirm that Xpeng and WM Motors are NIO’s competitors, as they are now pricing their cars as low as an array of traditional car makers like BYD, SAC and Geely, and sharing similar sales figures with their EV cars.
On the other hand, the advantage of NIO’s innovation in battery science is expected to play a more critical role in attracting new customers in the future. The industry average cost for batteries is decreasing, meanwhile. NIO has upgraded from 70kWh batteries in 2017 to 100 KWh batteries in 2019, and lets the customers enjoy a longer endurance by simply swapping their battery package without buying a new NIO car – NIO is calling it ‘Battery-as-a-Service.’
NIO is an impressive company, with good products, recovering sales figures and an outstanding reputation built among its customers through its NIO App. Despite these highlights, NIO still owes more than it owns; the gap between its assets and liability appears to be scaling, as its total shareholder’s equity plummeted to minus USD 494 million as of September 30, 2019, from minus USD 136 million as of June 30, 2019.