China Specialist, Auto and Industrial Specialist

Victoria Li

20 years experience as sell side analyst focusing on China's Industrial and Auto sectors

NIO: A Survivor Among All the Chinese Start-Ups

Equity Bottom-Up

After reporting a net loss of Rmb3.2bn in 2Q2019 due to weak sales performance, we estimate that NIO will not be able to breakeven this year. This arguably is not a surprise to the market. More importantly would NIO survive in the face of new challenges?NIO might need another Rmb15bn funding in 2019-2020 to keep its cash balance at reasonable level after heavy net cash outflow in 2019-2020.With the lauch of NIO ES6, NIO's sales is ramping up quickly in July-August. However, worse-than-expected NEV demand in China market is increasing the uncertainty of NIO's sales. Tesla's domestic produced Model 3 and Model Y are on the way to divert NIO's target customers' interest as well.We think chances are that NIO will be able to survive by raising funding in private transactions this year even if public markets may be less willing to fund them. However the situation remains touch-and-go and we recommend exercise caution for now

After reporting a net loss of Rmb3.2bn in 2Q2019 due to weak sales performance, we estimate that NIO will not be able to breakeven this year. This arguably is not a surprise to the market. More importantly would NIO survive in the face of new challenges?NIO might need another Rmb15bn funding in 2019-2020 to keep its cash balance at reasonable level after heavy net cash outflow in 2019-2020.With the lauch of NIO ES6, NIO's sales is ramping up quickly in July-August. However, worse-than-expected NEV demand in China market is increasing the uncertainty of NIO's sales. Tesla's domestic produced Model 3 and Model Y are on the way to divert NIO's target customers' interest as well.We think chances are that NIO will be able to survive by raising funding in private transactions this year even if public markets may be less willing to fund them. However the situation remains touch-and-go and we recommend exercise caution for now

NIO: Future Now Dependent on Near-Term Funding