NIO Report Company Industry and Economic Analysis.pdf

Company Report: Company, Industry and Economic Analysis

Atharv Kulkarni

Liberty University

BUSI 534: Business Valuation

Dr. Abiola Fapetu

September 10th, 2021

The subject business being valued is NIO, Inc; a smart electric vehicle manufacturing company,

located in China.

Concerns about climate change and energy security, along with advances in battery

technology, have stimulated a renewed interest in electric vehicles (Hidrue, 2011). NIO Inc.

the Chinese form, which stems from their vision to a more environmentally friendly future. Soon

after launch, big companies such as Tencent and Lenovo invested in NIO. The company also

received capital from holding and investment companies such as Temasek holding company in

Singapore, and Sequoia Capital and TPG Capital in America. In 2016, NIO was assisted by the

NIO 333 FE Team (Formula E racing division) and launched their first electric-powered, two-

seater sports car. The EP9 was built in 18 months, and debuted at the Saatchi Gallery in London,

England. The EP9 runs on lithium-ion batteries that can last up to 265 miles before needing to be

charged again. The car accelerates from 0 to 62 miles per hour in 2.7 seconds, and 124 mph in

7.1 seconds, as demonstrated by Richard Hammond in The Grand Tour. The EP9 set the world

record for the fastest lap by an EV for the Circuit of the Americas, Shanghai International

NIO launched their first volume manufactured electric vehicle, the ES8 during the NIO

Day event on December 16, 2017. Model ES8 is a seven-seater premium electric Sport Utility

electric mid-size luxury crossover SUV model EC6 in late 2019. One of the biggest differences

between model ES6 and EC6 is that the biggest battery available for ES6 is an 84-kWh unit that

allows a maximum range of 317 miles, while the EC6 comes with an all-new 100-kWh liquid-

cooled battery pack that allows a range up to 382 miles. On January 2021, NIO announced their

upcoming electric sedan Model ET7. The ET7 will be released for the public to purchase in 2022

and will act as a direct competitor to Tesla’s Model S sedan in China. Every electric vehicle

manufactured by NIO runs on lithium-ion batteries. The lithium-ion batteries have a high power-

to-weight ratio that allows the vehicles to travel further on a single charge due to less weight,

good high-temperature performance, and high energy efficiency. The NIO vehicles also consist

of a smart artificial-intelligence technology known as the NOMI AI. Along with being a

complete voice-activated AI digital companion, the NOMI AI can adjust car temperature, control

and components. NIO also promises satisfactory sales and after-sales management services to its

users. In addition, the company also offers convenient and innovative power solutions which

service centers; and offers NIO Certified, a used vehicle inspection, evaluation, acquisitions, and

sales service.

NIO sells its vehicles through its own sales networks, including NIO Houses and its own

mobile application. NIO Houses are showrooms for its vehicles, and act as clubhouses for its

users with a variety of social functions. The company’s mobile application is an interactive

online platform to retain user engagement and cultivate loyalty to the brand, which includes

other branding activities such as its annual NIO Day and Formula E team.

The company currently has about 7,763 full-time working employees at its various

headquarters across the world. NIO’s global headquarters is in Shanghai, China, in the Shanghai

Automobile Innovation Park. The employees working at the Shanghai headquarters are mainly

responsible for integrated vehicle research and development, manufacturing operations, sales,

marketing, and customer service. NIO’s North American headquarters is in San Jose, California,

in the heart of Silicon Valley, and the employees at this location are primarily responsible for its

primarily known for its history in automotive design. The company’s office located in London,

England, is primarily responsible for its performance program and serves as the headquarters for

its Formula E team. The employees at the office are responsible for the commercial Formula E

management, strategic management, and the development of its supercar Model E9. In addition

The demand for electrical vehicles has increased in the US and European markets, and

The current customers of NIO only include those residing in China, as the company has not

started selling its vehicles outside the country. Just like Tesla, NIO’s primary customers are

it received the European Whole Vehicle Type Approval for its Model ES8. The company plans to

most EV-friendly country. NIO also plans to bring its Norwegian customers with its direct sales

and service network including NIO House, NIO App, Power Swap Stations, and NIO Life.

William Li also told the journalists in China that they plan to launch NIO in five more European

countries after Norway.

As a new entrant into the EV industry, NIO has a limited operating history and faces

many kinds of risks and challenges. Failing to address any of these may materially and adversely

The electric vehicles may not perform in line with customer expectations. For example,

which its vehicles could travel at a single charge may decline as a function of usage, time, and

other factors. The vehicles may also contain defects in manufacture and design that could cause

them to perform less efficiently than expected. Since NIO vehicles use a substantial amount of

software code to operate their complex software products, they could often contain defects and

errors when initially introduced. If any vehicle fails to perform as expected, the company might

have to delay deliveries, or initiate product recalls that could adversely affect the brand and

business operations.

The business may face challenges providing its charging solutions. While the company

its users, and providing the services is subject to challenges. These challenges include security

risks and sending teams in appropriate areas. While the Chinese government has supported the

roll-out of public charging networks, the current number of charging stations is considered

insufficient. The company faces significant challenges when rolling out its charging solutions as

they require permits, land use rights, and filings, and, to a certain extent, is subject to the risk that

government support could discontinue. Such unanticipated challenges can hinder the company’s

ability to provide adequate solutions and prevent the company from meeting user expectations.

Difficulties in providing charging solutions can hurt the company’s reputation and business could

be materially and adversely affected.

The industry and its technology are evolving at a fast-pace and may be subject to

unexpected changes. Developments in alternative technologies such as improvements in the

develops, the company may have to modify its business model and update its services and

solutions. These changes may achieve different results than expected and could have a material

adverse effect on NIO’s results of operations. The company may face challenges with keeping up

with changes in EV technology and cause its competitiveness to suffer. Developments in

alternative technologies such as advanced diesel, or improvements in the fuel economy of the

internal combustion engine, may materially and adversely affect NIO’s business and prospects.

Since fuel is abundant and inexpensive in China, consumers may prefer those over charging

vehicles, and failure to successfully react to changes in existing technologies could harm NIO’s

customers’ willingness to adopt electric vehicles. The demand for vehicle sales depends to a

great extent on general, political, social, and economic conditions in each market and the

introduction of new automobiles and technologies. As NIO continues to grow, economic

conditions and trends will impact its business, prospects, and results of operations. The demand

for NIO’s electric vehicles can also be affected by factors directly impacting the vehicle’s price

such as prices of raw materials and parts and components, and government regulations including

tariffs and other taxes.

NIO’s financial results may vary significant from period to period due to factors such as

seasonality of its business and fluctuations in the company’s operating costs. Demand for new

significantly in future periods, as the company designs and manufactures new electric vehicles,

opens new NIO Houses, and increase marketing activities.

Xiaopeng Motors, also known as Xpeng, is a leading Chinese smart electric vehicle

manufacturing company that designs, develops, manufactures, and sells Smart EVs in China.

Xpeng was co-founded in 2014 by Chinese entrepreneurs He Xiaopeng and Xia Heng. The

company is known to produce environmentally friendly vehicles that offer attractive design and

high performance, coupled with safety and reliability. Their primary target is the large and

growing base of tech-savvy middle-class consumers of China. Xpeng currently sells an SUV

Model G3 and a four-door sports sedan Model P7. The company provides its vehicle owners

replacement service, and free delivery and installation of home charger. Xpeng aims to drive the

Smart EV transformation with tech and data in the hopes of shaping the mobility experience for

the future.

Li Auto Inc. is a Chinese company that designs, develops, manufactures, and sells

premium smart electric vehicles. The company was founded in 2015 by Chinese businessman Li

with advanced smart vehicle solutions. The company concentrates its development efforts on the

next-gen electric vehicle technology, and smart vehicle solutions. Following the success of Li

ONE, Li Auto plans to expand its product line by developing new vehicles, including battery-

powered electric vehicles and extended-range electric vehicles, to target a broader consumer

base.

In 2021, market analysts Benchmark Mineral Intelligence predicted an “acute” shortage

of lithium minerals from 2022 onwards. Lithium is used globally in ceramics and glass (31%);

batteries (23%); lubricating greases (10%); air treatment (5%); continuous casting (4%); primary

aluminum production (3%); other uses (24%) (Forster, 2011). According to Forster, the demand

for electric vehicles has drastically increased each year, which thus increased the demand for

lithium. The lithium-ion battery is the most popular battery for electric vehicles due to its high

power-to-weight ratio allowing more energy storage and traveling long distances. If the world

faces a lithium supply shortage in the upcoming years, the price of the mineral would drastically

battery types to power their vehicles. The manufacturing companies would face even more