Nio Inc (NIO)

[LionsTact]

Cramer likes NIO

We once again are nibbling on shares of this Chinese electric vehicle company after reading through the annual 20- F that Nio recently filed with the Securities and Exchange Commission (SEC). The filing not only provides a positive update on the company’s strategy, but it also brings some interesting things to light.

For those unfamiliar with this SEC filing, it is an annual report filing for non-U.S. and non-Canadian companies that have securities trading in the U.S. The filing’s goal is to standardize the reporting requirements of foreign-based companies so investors can better evaluate those investments alongside domestic equities. Like 10-K filings for U.S. companies, reading through a company’s 20-F can offer incremental insights into a company’s business, strategy or financial position.

In the 20-F we found language addressing Nio’s plans to bring new products to market, including its all-new ES8 that it started shipping this past April as well as plans to begin making deliveries of its EC6 smart premium electric coupe SUV in September. The filing goes on to share that Nio targets a new model launch each year as it looks to “offer our users more choices to suit their preferences and target different segments within the premium electric vehicle market in China.” We see this roadmap helping diversify not only the company’s product offering but also its price point as well.

Nio also mentioned that it intends to remain focused on the China electric vehicle market; however, one headwind we need to be mindful of is that the current number of charging stations for electric vehicles is generally considered to be insufficient. That deficit has led Nio to develop and offer its suite of Nio Power solutions that include Power Home, its home charging solution; Power Swap, the company’s battery- swapping service; Power Mobile, a mobile charging service provided through charging trucks; Public Charger, a public fast-charging solution; and Power Express, its 24- hour, on-demand pickup and dropoff charging service. As the number of charging stations grows in China, we suspect the need for Nio Power will decline over time. As a reminder, more than 94% of Nio’s revenue is tied to vehicle sales.

One other notable that jumped out at us in the 20-F was the 12.6% beneficial ownership with aggregate voting power of 21.1% in Nio heldby Tencent Holdings (TCEHY:OTC). In comparing Nio to Tesla (TSLA:Nasdaq), we would compare Tencent to Google (GOOGL:Nasdaq) given that both have a strong position in digital search and advertising and are developing other value-added services. One difference to call out between the two is that Google owns Waymo, its autonomous driving car project, while Tencent’s ownership in Nio gives it access to Nio’s Nio Pilot that provides Level 2 autonomous driving functionality. As background, with Level 2 a vehicle can control both steering and accelerate/decelerate; however, a human must be in the driver’s seat and can take control of the car at any time. Tesla’s Tesla Autopilot is Level 2.

Thats from Today May 19th 2020