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INVESTMENT: NIO
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NIO
Will NIO deliver on its promise to investors?
By Morgan Brady

BT 201910 INVESTMENT 04China has been rising as a key manufacturer of automobiles. It has been the largest automobile producer in the world since 2008. Today, China has the capacity to produce more than 23.72 million vehicles per year. In 2014, vehicles produced in China accounted for 26% of global production. Many brands are rising domestically and in the global markets, but when it comes to electric vehicles, one brand, NIO, deserves attention and recognition as a key rising supplier.
 

NIO was established in 2014. On the same day of its launch, it launched its first model, the NIO EP9 Sports car. The founders were William Li (Bin Li), the Chairman of Bitauto and NextEV, and Qin Lihong. Bin Li is also currently the CEO and the chairman. The company chose Shanghai as its headquarters, and it specializes in designing and developing electric autonomous vehicles. The company sells spare parts in addition to cars and offers battery charging services.
 

中国作为汽车主要制造商之一一直在崛起。自2008年以来,一直是世界上最大的汽车生产商。2014年,中国生产的汽车占全球产量的26%。许多品牌在全球市场都在崛起,在电动汽车方面,一个品牌NIO作为重要的新兴供应商值得关注。蔚来是一家全球初创电动汽车公司,创办于2014年。2016年11月21日,蔚来汽车产品及品牌发布会在伦敦萨奇艺术馆举行。发布会现场,蔚来汽车发布了英文品牌“NIO”,旗下首款电动超跑也首次正式亮相,命名NIO EP9。
 

NIO House

The company also has user centres around mainland China, to allow its users to experience the cars without driving them. The houses feature innovative and modern architectural designs, and comfortable spaces, where people can work and do the activities they enjoy. One of the purposes of the houses is to convey NIO’s culture which is human oriented, warm, and bright. The houses usually also include a kitchen, a library, and a living space. In a way, the houses are future-looking showrooms for a future-oriented brand.

BT 201910 INVESTMENT 02NIO House用户体验

该公司还在中国大陆设有用户中心,允许用户在不驾驶汽车的情况下体验汽车。该建筑设计现代,空间舒适,这些设施建设的目的之一是传达NIO的文化,以人为本,温暖而明亮。
 

Financial performance

The company is still considered young, or a toddler, according to its CEO, but it has bright prospects. Based on the figures of the first quarter of 2019, NIO has not turned in a profit, yet. Its revenues for the period stood at CNY 1,631.16 million, and its net income stood at CNY -2,620.82 million, with a profit margin of -160.67%. Despite the loss incurred, the company has been growing its assets, which reflects focus on investment and long-term orientation. Total assets increased from over CNY 10 billion in 2017 to CNY 18,842.55 billion in 2018. Its debt to assets rate stood at 17.18%. The assets growth will probably lead to profitability in the upcoming years, as the company is still within its payback period and hasn’t reached breakeven point, yet.

BT 201910 INVESTMENT 09财务绩效

据首席执行官称,该公司仍被认为是刚刚起步,但前景光明。财报显示,蔚来汽车2019年第一季度净亏26.236亿元,同比增长了71.4%。蔚来创始人、董事长、首席执行官李斌表示:“2019年第一季度,蔚来交付了3,989辆高性能电动SUV ES8,连同4月交付的1,124辆,截至2019年4月30日,交付总量达到16,461辆。”
 

“蔚来的第二款量产车5座高性能电动SUV ES6将在6月如期下线,第一批交付预期将在同月开始。截至目前,我们收到了超过12,000个ES6订单,其中超过5,000个订单是在上海车展结束后的一个多月内达成的。”
 

李斌说,蔚来有信心随着越来越多的潜在用户亲身感受了ES6,其富有竞争力的性能和价格会引起大众市场更大的兴趣。”
 

Share performance

The company’s share has been declining from 10 USD per share to around 3 USD per share in the previous 12 months. Despite the challenges facing the company, such as the cash burn rate, and the slowdown in the auto market, the CEO Li said that he expects the company to become profitable in less time than what Tesla took (Tesla took around 16 years to become profitable). Li said that investors are not looking at the long-term value of the company, and he was very positive about the growth prospects. Li expects the company to acquire a bigger market share in the Electric vehicle market in China, which is projected to reach 50 million units in annual sales by 2040. In short, the low share price may be a purchase opportunity since it is very cheap at the moment and has not priced in potential growth. The stock is listed in the US rather than China.

BT 201910 INVESTMENT 05市场份额表现

在过去的12个月中,该公司的份额从每股10美元下降到每股3美元左右。尽管公司面临挑战,但李先生表示,他希望公司能够比特斯拉花费更短的时间来实现盈利(特斯拉花了大约16年的时间才能盈利) )。投资者关注公司的长期价值,他对增长前景非常乐观。 预计该公司将在中国电动汽车市场获得更大的市场份额,预计到2040年年销售额将达到5000万辆。简而言之,低股价可能是一个购买机会。
 

Private placement in the value of $200 million

Recently, the company announced a private placement on convertible notes in the value of $200 million, with some of it coming from the CEO Li. The placement includes two tranches, the first is due in one year from September, 2019, and it contains two interest payments and a premium. The second part is due in three years, with a 6% premium payment at the end, and is convertible at $3.12 per share. This could mean significant dilution of equity at the conversion date.

BT 201910 INVESTMENT 03蔚来汽车私募配售2亿美元可转换债

9月5日,蔚来汽车公布,公司已经与董事长兼CEO李斌、一家腾讯控股隶属公司告竣了可转换债券认购协议。按照协议,蔚来汽车将通过私募配售方法向投资者刊行和贩卖总本金额为2亿美元的可转换债券。腾讯旗下的附属公司和李斌将分别认购1亿美元的可转换债券本金,且各自分两次平均认购。第一批发行的债券将在360天内到期,不会产生利息,但要求蔚来汽车在到期时支付本金2%的溢价。第二批发行的债券将在三年内到期,也不会产生利息,但要求蔚来汽车在到期时支付本金6%的溢价。360天期债券将可转换为蔚来汽车的A类普通股(或者ADS),转换价格为每股2.98美元,在到期前第15天起由持有人选择是否兑换;三年期债券在发行一周年后可根据持有人的选择,以每股3.12美元价格转换为蔚来汽车的A类普通股(或者ADS)。而且,三年期债券的持有人有权要求蔚来汽车于2022年2月1日以现金回购全部或部分债券。
 

Challenges facing NIO

The company is currently in a tough spot. The US-China trade war has had a significant impact on the automobile industry in China. The local EV market is becoming flooded with entrants, which can erode profitability. NIO is slow to increase its capacity, and still has a competitive gap with the likes of Tesla. NIO has laid off workers recently to address some of the challenges, but more needs to be done.
 

The company has backing from investors who invested in it at the initial stages, such as Tencent, Temasek, Baidu, Sequoia, Lenovo and TPG. However, if NIO does not turn things around, the patience of investors, both big and small, may run out.

BT 201910 INVESTMENT 06NIO面临的挑战

该公司目前处境艰难。美中的贸易战对中国汽车工业产生了重大影响。国内电动汽车市场正充斥着进入者,这会侵蚀盈利能力。 NIO增加产能的速度很慢,与特斯拉的竞争仍然存在差距。 NIO最近裁员解决了一些问题,但还有更多工作要做。
 

Conclusion

While NIO is offering a good product to a growing market, it needs to do more to survive. It needs a clear and strong differentiation strategy to stand out from the competitive crowd. It also needs to significantly improve its processes, operations, and capacity, and increase efficiency, in order to be able to produce at scale and increase profitability. For investors, the stock could still go lower from here. However, signs of improvement and success in addressing the current challenges may bring back optimism and drive the stock to new heights.

BT 201910 INVESTMENT 07结论

虽然NIO正在为不断增长的市场提供优质产品,但它需要做更多才能生存。它需要明确而强大的差异化战略才能从竞争激烈的市场中脱颖而出。

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