NIOtime #9: Is NIO delivering a new record high? Here is our October Estimate #2

Technical Chart. Media News Recap. NIO App Stories. All from a group of NIO global fans exclusively for the NIO community.

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Dear friends,

It’s NIO time, Blue Sky is Here!

Happy Friday! Woo hoo, congratulations to all of us who hold NIO earlier and long until today. Here we go from the last issue. Is NIO waiting for another breakout soon?, this week NIO was breaking through the $30.00 level and stayed above this price zone! How are you celebrating another 52W high this weekend? Please do let us know your plan in the comment below!

This issue is a special one as we are nearing the end of the month and coinciding with the NIO October delivery announcement. We decided to combine these two issues into one. As usual, we will have weekly stock commentary, highlights commentary, and share our justifications for the revised estimate of October vehicle delivery.

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Technical Chart

Recap what we commented last week here, we commented that next week we may expect stock hitting its previous high. If we see NIO pulls back to EMA21 or middle level of BB range, we would take small position on that zone.

This week NIO did pull back near EMA21 and bounced back to hit a new 52W high at $32.20. In general, NIO was tough and resilient against general market selloff across major indices due to increasing volatility in VIX index on upcoming U.S. election. NIO ended beautifully at $30.58 which was 12.5% higher than last week’s closing price.

The market sentiment was looking for clues of its October delivery vehicle number as well as the annoucement of its Q3 earning call. We think this week’s breakout has priced in the October delivery expectation with NIO announced they have achieved 5,000 production on 29 October 2020. We will see how the market play around the delivery news on next week and likely to look for more exciting news from NIO.

Be “cautious” on Monday’s potential breakout on China’s government official news on its 5 years policy on renewable energy plan. Otherwise, next week NIO may pull off to its EMA8 ($28.72) & EMA21($26.07) and start building momentum for earning call expectation. Anyway, this is just our observation, not finanical advice as always. DYODD and invest safe!

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This Week’s Top 7 Highlights

1. Monthly Production First Time Exceeded 5,000 units

2. Morgan Stanley, HSBC Analysts Rating Update

3. NIO’s User-Centric Response to Flat Tire Repair Costing $20,800

4. NIO Power Update

5. NIO House & Space Update

6. NIO EP Club Sneak Peak Talk by Li Bin

7. NIOtime October Estimate #2

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News

1. Monthly Production First Time Exceeded 5,000 units

On October 29, 2020, NIO's 5,000th vehicle of the month rolled off the production line at the Hefei Advanced Manufacturing Base.

This is the first time that NIO's mass production has exceeded 5,000 units per month, and also the first time that a high-end car brand in China has reached 5,000 units per month. (News and Photo Source: NIO App)

Congratulation to NIO-JAC production team in meeting the demand by working hard night and day. Despite one week national holidays in earlier month, the NIO's productive output once again proves that NIO has great potential in the high-end car industry. This news gave NIO investors a hint on their production capability, surpassing 5,000 units in 15 working days. To us, this is impressive and this is exactly what Li Bin promised about 5,000 vehicle beyond September in previous interviews.

2. Morgan Stanley, HSBC Analysts Rating Update

In a report titled "A strong EV leader in the making" published on October 28, Morgan Stanley analyst led by Tim Hsiao revised up forecasts on better-than-expected Q3 deliveries, upside potential to margin, and an update of the assumptions behind NIO's vehicle and long-term take rate of NOP. The bank stays Overweight on NIO and raises the price target to $33, up by 61% from $20.5.

HSBC also initiated coverage of NIO Inc. with a Hold rating and $30 price target. (News Source: cnTechPost & TheFly)

This week we saw two analyst update, one from Morgan Stanley and HSBC. Both of them maintain price rating above $30.00. We haven’t get a chance to look through their rating thesis. If you happen to have one, please feel free to send the document to us for futher coverage. To us, rating update can be good to short term running but for long term this is neutral or lagging behind as what their thesis is based on current information from NIO.

3. NIO’s User-Centric Response to Flat Tire Repair Costing $20,800

Recently, an NIO ES8 owner claimed that his vehicle only had a cracked wheel and a broken tire, but after repairing, he found out that it cost up to RMB 140,000 yuan ($20,800). His complaint was reported by the Chinese media, which brought the NIO under fire.

Mr. Zheng bought NIO ES8, which spent over RMB 500,000 in 2018, and purchased NIO premium worry-free service, including offers such as free repairs. On September 3, 2019, he accidentally drove the vehicle into a roadside, causing the ES8's left front wheel hub to a crack and a broken tire.

According to media reports, he did not call the police at the time or contact the insurance company, as he believed the vehicle was suffering only a flat tire, and a small repair cost could result in higher insurance premiums the following year.

He took the vehicle for repairs, but when he picked it up a few days later, he found a list of dozens of repairs costing RMB 146,000. His insurance company refused to pay because they were not notified for the first time, so he had to bear the cost himself. Therefore, he questioned the NIO after-market center's excessive maintenance of his vehicle.

Many internet users immediately criticized NIO after the recent media reports on this. Following the criticism, NIO's user-centric response on October 27 brought the truth of the matter to light.

Qin Lihong, co-founder and president of NIO, said the dispute stemmed from the car owner's failure to report the accident promptly, and a compromise has been reached with a solution offered to Mr. Zheng.

In an email, Qin Lihong said that the repair cost of over RMB 140,000 was true, but that the owner's previous claims of a flat tire and wheel damage alone were not true. The email stated that the vehicle suffered severe damage to the vehicle's chassis and suspension system in addition to the wheel rims, so the RMB 140,000 repair cost was reasonable. His insurance company refused to pay for the repairs, and NIO agreed bore the full cost by admitting this was their fault. NIO will strictly investigate the case and review the internal procedures to prevent this from happening again to its users, the email showed. (News Source: cnTechPost)

We salute NIO’s user centric response to this case despite NIO user himself was responsible to report the incident at first place and resolve the matters quickly with NIO aftermarket team. In the email, Qin admitted this negligence was due to management issue and improper standard operating procedures of maintainence and repair processes. We would like to highligh that Qin reiterated that NIO is user enterprise and high user satisfaction is their ultimate goal. They are willing by hook or by crook to make sure everything is done right for users. We are impressed by NIO putting user first all the time to ensure its brand as user enterprise.

4. NIO Power Update: 158th Power Swap & 67-69th Power Charger

NIO Power Swap #158 | Shenzhen Longhua Hongshan 6979

NIO Power Charger #67 | Shenzhen Longhua Hongshan 6979

NIO Power Charger #68 | Shenzhen Shekou Factory Equipment Supplier

NIO Power Charger #69 | Shenzhen Bijia International

This week we observed one expected Power Swap station built in Shenzhen and three Power Chargers established. From our earlier issue item 9, NIO intended to build one Power Swap per week this year and expediate to one Power Swap per day once the second generation is launched next year while Li Bin foresees 1,000 battery swap stations built in China by 2023. (News and Photo Source: NIO App)

5. NIO House & Space Update: 2 NIO Spaces Added

NIO Space #178 | Longyan Wanda Plaza, Fujian

NIO Space #179 | Yueqing Butterfly Square, Wenzhou

Two new NIO spaces added this week. For past NIO Space photos, you may visit our facebook photo album here. (News and Photo Source: NIO App)

6. 7 Sneak Peek from NIO EP Club Talk by Li Bin

   

According to an EP Club owner posted on social media, we summarized seven sneak peeks by Li Bin said at the EP CLUB gathering that is very exciting! Noted that these items are not confirmed by NIO official yet, from a note sharing by EP Club owner on social media. DDYOD. (News and Photo Source: Weibo & NIO App)

1. 150kWh battery with NEDC range over 900km in development! (Converting the ES6 to a 150-degree battery, the NEDC range will be close to 1000 km). The current battery is 70/84-degree capacity.

2. Next Friday, NIO will release more details on the 100-degree battery, expecting a small amount of delivery at the end of November due to supply chain constraints at $CATL. A flexible upgrade annual battery lease program will be announced simultaneously.

3. Power Swap service can only be replaced with a portion of NIO points (this is like NIO currency which users earn at the NIO App), the biggest worry of NIO is not to lose money, but to avoid the big flow of points to the battery swapping services, thus there will be no points circulation in the community operation and mall.

4. Support the opening of the 20kW charging line for Sichuan-Tibet, Yunnan-Tibet, and Qinghai-Tibet lines; Li hopes to establish a small portion of the charging network before NIO DAY 2020. Li Bin would provide a subsidy for the charging resources for the Sichuan-Tibet highway and Qinghai-Tibet highway himself.

5. The first international NIO House has already chosen the location in Norway, which indicates NIO will likely enter Norway next year.

6. The next NIO sedan car will be built with the second generation platform (NP2) compared to the existing platform is a qualitative improvement in terms of hardware, car chassis, etc. The second-generation platform is evolving and designed to adapt the market in the next 3-5 years.

7. NIO consider to give up current benefits of free home charging for six times a month to exchange free power swap should be a more long-term move, but do not rule out further reducing the number of free charging benefits, because NIO wants to ensure the Power Swap user experience and reduce the exchange station long queue problem.

7. NIO Delivery October Estimate #2

Last week NIOtime #8 estimated the October Vehicle Delivery to be 5,250 (5,000-5,500). This week we received a clue from NIO on its production capacity. On October 29th, NIO has achieved 5,000 units with one more working day. We adjusted our estimate to a slightly lower number than last week, given the supply chain delivery constraint on the last day.

We are confident in another high record delivery by NIO this month as this is commented by the executive director of NIO. "NIO sales are setting new all-time highs every month, which we estimate may become a norm in the near future and reflects customer acceptance", said Shen Feng, executive vice president of NIO, on October 27. (News Source: cnTechPost) NIOtime is highly confidence that NIO will hit slighly over 5,000 units this month together with remaining units rolling from last month. Thus, NIOtime revised our October delivery estimate to 5,187 (4,987-5,387) which is about 105% YOY growth.

Last week NIOtime launched a survey recording delivery estimate from public targeting through NIOtime audiences. The survey results can be viewed on this google sheet.

In summary, out of 19 entries, the average estimate is 5,361 and the median estimate is 5,300. This estimate is above to our own estimate and near our upper estimate bound. Please noted that the sample data is still relative small and hopefully will get more public entries for the upcoming months.

Summary

Is NIO delivering a new record high? Yes, we are looking forward to the delivery announcement and the new 100-degree battery detail next week. Nevertheless, we are eagerly looking for Q3 earning call to get more NIO ins and outs lately.

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