Stranagor
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ET7: Here's why orders may exceed 100,000 in 2022 and what that means for Nio's market cap
Nio ET7 orders commence January 20, 2022. Here is why those orders could be over 100,000 in 2022.
cnevpost.com
(Image credit: CnEVPost)
NIO ET7 orders commence January 20, 2022. Here is why those orders could be over 100,000 in 2022.
Pent up demand in premium luxury segment over 500,000.
For numerous reasons (national & local policies, taxes, driving restrictions by both time & area detailed later) ICE Mercedes Benz, BMW, Audi ("BBA") sales have plummeted about 25% from prior levels of 2 million annually despite demand for premium luxury vehicles being greater than ever – ET7 uniquely poised to capture biggest share of those lost 500,000 ICE BBA sales.
BBA EV sales & offerings have been dismal resulting in NIO sales, despite only offering SUVs, being greater than BBA EV sales combined – ET7 will be part of cure to NIO's SUV only problem.
MIC 2025 / Replacing leased Audi A6 fleet.
Consistent with MIC 2025 leased Audi A6 fleet will be replaced by 2025 – ET7 is perfect Audi A6 replacement for national, state & local governments. Chinese car rentals companies, taxi fleets will adopt buying policies consistent with MIC 2025 another boost for ET7 sales.
NIO's need for premium luxury sedan – numbers don't lie. 80% of total XPeng Motors (XPEV) sales are Sedans. Model 3, biggest selling EV in world is Tesla (TSLA) Model 3 sedan. BBA dominated premium luxury segment globally with sedans over past decades – ET7 sedan adds major new dimension to NIO sales potential.
ET7 perfect EV to ride Chinese S-Curve – Chinese 2021 EV sales 3 million. Annualizing NOV 2021 sales of 378,000 gives you 4.5 million sales. 2022 EV sales could be 6 million or double 2021 numbers (current policies & demand ensure that). No reason why NIO sales could not double 2021 to 2022 from this fact alone & ET7 is perfect new model addition to ride this EV S-Curve.
Major Chinese cities policies skewed to richer buyers with good EV products – BYD, TSLA, XPEV, LI & NIO are ALL capacity constrained. Currently they can sell as many EV as supply chain & capacity limitations allow. NOTE VW, BBA are all having problems selling their EV offerings because Chinese consumer is NOT stupid & recognizes a poor product.
Consider Shanghai – In December 2021, 204,863 customers participated in vehicle plate bid auction & 11,368 winners paid on average RMB 91,021 to obtain one of the limited number of vehicle plates sold. At least 7 other major Chinese cities have similar bid auction policies.
In addition to paying RMB 91,000 to get vehicle plate, then buyer must pay additional 10% vehicle purchase tax to buy ICE cars. No wonder BBA ICE sales are plummeting despite high core demand for cars. So in premium luxury segment that means you have paid RMB 130,000 before even paying for car itself with only 1 in 18 chance to even get to that stage of buying car. No doubt car buying in China is sport of more affluent middle class.
In December remember over 190,000 Shanghai buyers FAILED to get vehicle plate license even though they offered big money. A ready made buyers list – perfect for ET7 ahead of its launch.
Shanghai is China's largest EV market. It is also market where NIO is market leader with 5 NIO Houses. "Out of City" ICE vehicle plates face major restrictions from driving on elevated freeways plus time of the day driving restrictions. All super reasons for ET7 "green vehicle plate" purchase in Shanghai & other major cities.
Chinese love a deal – Don't we all! NIO is only company that can sell EV over RMB 300,000 & still qualify for government subsidy courtesy of battery swap. With BaaS, battery swap & government subsidy NIO gives you approx. RMB 80,000 to 100,000 price entry advantage plus no need to pay RMB 130,000 just to get to stage of being able to buy ICE vehicle (see above). That is a huge approx. RMB 200,000 price advantage for ET7 & other NIO EVs Vis a Vis ICE.
Chinese are well accustomed to car lotteries – 3.5 million residents of Beijing participated in Beijing car lottery with 1 in 100 chance of success. 200,000 participated in the Shanghai bid auction paying RMB 91,000 for success. Big number participate in at least 7-8 other major cities. Millions in China want the chance to buy a car & have the money. A big status symbol especially if you own a NIO – All of this suggests there will be thousands ready to place an ET7 order.
ET7 Supply Chain Problem Healer – With ET7 you no longer have situation of dozens of chips needed with any one single chip being a potential supply chain issue crimping deliveries. 4 NVDA Orin SOC chips plus QCOM 5G Snapdragon Digital Cockpit chip will dramatically simplify ET7 chip supply chain issues. No doubt CATL, NVDA & QCOM will have been given long lead times on ET7 supply chain needs.
Ready, Set, GO for January 20th – NIO will start locking in ET7 orders on January 20th. All available information suggests a deluge of orders. First order will get March 28th 2022 delivery. Quickly delivery dates will extend to April / May / June & later as order book fills. Our Chinese friends ordering 2-3 weeks later than January 20th may be able to give us good indication of a) Total ET7 orders b) Estimated monthly production rate of ET7.
For all of the above reasons I expect ET7 orders to be over 100,000 in 2022.
Capacity Increases?
Nothing like a big order book to motivate management to implement additional capacity increase. Big orders for ET7 in January / February 2022 may lead to Phase 2 & Phase 3 expansion announcements for NeoPark & perhaps even announcement of additional NeoPark.
ES7 may be introduced at Beijing Auto Show April 21, 2022 which will also motivate NIO to consider further capacity increases.
ET7 introduction in Germany in Q3 2022 will also motivate capacity increase considerations.
Where does that take us in terms of NIO sales numbers for 2022?
Q1 2022 30,000 (very conservative) with ET7 being produced perhaps in February & March 2022 taking JAC Plant to double shift BUT not being delivered.
Q2 2022 30,000 in April (ET7 produced in February March & April sold in April); 20,000 in May; 20,000 in June – Total 70,000.
Q3 2022 NeoPark comes online giving 30,000 in each month of Q3 – Total 90,000 (again could be conservative based on China speed for NeoPark completion in Q2 2022). Again could be production of ET5 at NeoPark in August to provide deliveries in September 2022.
Q4 2022 – 40,000 in October, 40,000 in November, 50,000 in December with ET5 joining ET7 (maybe ES7 as well in December 2022) in September 2022 sales with its own big order profile total Q4 130,000.
Total 2022 NIO deliveries based on above would be 320,000.
Where does all of this take NIO in terms of market capitalization?
I have always maintained that TSLA is gold standard by which all EV companies must be measured in terms of valuations.
NIO ASP RMB 420,000 approx 40% more than TSLA ASP 300,000.
NIO gets additional ADaaS RMB 680 monthly revenues on ET7 & ET5.
TSLA includes pollution credits to VGM – NIO does not.
Take Q4 2022 NIO numbers of 130,000 add 40% for higher NIO ASP gives TSLA equivalent sales for NIO of 130,000 x 1.4= 182,000 (by which time given ADaaS & 100% Chinese manufacturing NIO may have VGM similar to TSLA).
182,000 is approx. two thirds of TSLA 308,000 Q4 2021 sales.
Arguably NIO growth prospects are better based on broader product line & less competition for NIO in premium luxury segment.
Giving NIO market cap. TWO THIRDS of current TSLA market cap. takes NIO to over $500 billion market cap EOY 2022.
