Nio Explores Additional Revenue Stream

Nio (NIO) is in talks with other automakers about licensing its battery-swapping technology, according to a Financial Times report, which cited the company’s European President, Hui Zhang. Founded in 2014, Nio is a Chinese electric vehicle company, and has sold more than 180,000 cars. 

Nio is the only company to commercialize a battery-swap system, an apparently challenging business that Tesla (TSLA) tried and dropped. The process involves drivers replacing their drained batteries with fully charged batteries at a charging station. The swap only takes a few minutes, saving drivers time.

Nio wants to sell its technology to automakers interested in the battery-swapping system but are unable to develop it on their own. The executive said the company is in discussions with local and international automakers about battery-swap system licensing. If it works, the strategy may provide an additional revenue source for Nio beyond selling cars.

Nio’s International Expansion Efforts

The talks around battery-swapping technology licensing come as Nio also seeks to broaden its global presence. The company has primarily sold its cars in its home market, China, but now it wants to enter more international markets. It has begun its foray into Europe from Norway, where it entered in 2021. Now it plans to enter Germany, Sweden, Denmark, and the Netherlands in 2022. From Europe, Nio plans to go to the U.S. 

Nio’s expansion plan attests that Europe is an important market for electric car companies. Recently, Tesla inaugurated a mega factory in Germany, which will serve as its European manufacturing hub, with a capacity to produce 500,000 cars annually.  

As part of its international expansion, Nio is setting up more charging points. It aims to have 5,000 charging stations globally by 2025, up from about 800 stations currently. 

Wall Street’s Take

On April 4, UBS analyst Paul Gong upgraded Nio to a Buy from a Hold but lowered the price target from $42 to $32, which now indicates 42.4% upside potential.

Consensus among analysts is a Strong Buy based on 17 Buys and two Holds. The average Nio price forecast stands at $44.06 and implies upside potential of 96% to current levels. Shares have declined 44% over the past year.

Blogger Opinions

TipRanks data shows that financial blogger opinions are 81% Bullish on NIO, compared to a sector average of 68%.

Key Takeaway for Investors

In addition to opening a new revenue stream for Nio, making the battery-swap system available to others may also benefit the industry by helping boost electric vehicle sales. For example, more drivers may be interested in getting an electric car if they knew that re-energizing would be as fast as refilling a car tank with gas. Additionally, electric vehicles may be more affordable if the battery cost is not included in the initial price and drivers are allowed to rent a battery and swap it when out drained.

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