Red beans grow in the south, Nio sends a few branches.

Xiaomi has sparked another major surge in the pure electric vehicle market, making people marvel: the EV market is improving—it used to be cutthroat, now it's fiercely competitive. After financially investing in Nio, XPeng, and Li Auto, Xiaomi is jumping into the fray itself with "are you ok," which shows how irresistible and alluring the shift from oil to electricity truly is.

The stars hang low over the vast plains, the moon surges with the great river's flow.

Currently, I hold three major EV stocks, with a clear investment thesis—Nio, BYD, and Tesla. While the industry is competitive, these three companies have strong differentiation. For example, Nio’s premium market positioning and BaaS (Battery as a Service) strategy create a differentiated approach. Some may not be familiar with BaaS, so here’s an explanation: under BaaS, Nio separates the battery from the car—selling the car to the user and the battery to a battery asset management company (WeiNeng). The battery asset company then leases the battery to the owner, creating a long-term cash flow rental model.

My friend Lao Qian (who’s called "Old Money" not because he’s old money but because his surname is Qian) is a Nio owner who leases his battery. I asked him, "Why don’t you just own the battery?" He replied, "Look, while battery rental costs fluctuate with battery prices, they fundamentally depend on WeiNeng’s operational and management efficiency. Batteries require maintenance, and you’re unlikely to do it as well as a large-scale, standardized operation. Plus, battery swapping is fast—I’m an impatient person." His conclusion? For an owner, leasing a battery makes more sense than owning one. And honestly, he makes a good point.

For this Nio earnings analysis, I’ll start with key takeaways before diving deeper to avoid ambiguity:

1. Battery swapping and fast charging are not cannibalistic—they complement each other. Swapping is one of the right evolutionary paths. BaaS price adjustments lower the entry barrier, increasing BaaS adoption—one of Nio’s sales drivers.

2. Swapping, charging, and energy storage infrastructure require heavy upfront investment but yield long-term returns. Nio’s swap stations double as energy storage units, akin to Amazon’s AWS—once established, they can serve external clients.

3. Nio’s years of accumulated technological platform capabilities are entering a high-return phase. If market shortsightedness is overcome, I believe the advantage curve will emerge this year. With the stock price so low, as an investor, I’m eager to dive into this cocoon of opportunity.

Some might already want to argue—hold on, let me elaborate on these three points.

First, let’s discuss the growth logic of battery swapping and why this competitive path is rational, even inevitable. Because, frankly, revolutionary battery tech remains largely in the realm of imagination.

EV tech development revolves around batteries, but contrary to popular belief, battery progress is slow—today’s mainstream lithium-ion tech matured when wireless "The Legend of the Condor Heroes" was still airing. In the foreseeable future, batteries will remain the biggest cost in EV operation and maintenance. Current batteries last about eight years; early Tesla owners, after 500,000 km, must replace them—a normal societal phenomenon. But the problem is awkwardly impolite: the car’s residual value is often less than a new battery’s price.

Men are like sugarcane—sweet at first, then just fiber; EV batteries are like flowers—fragrant at first, but eventually, they crumble. When a battery can’t hold 100 km per charge, you’ll regret owning it. Swapping solves two issues: slow charging and battery degradation, making long-distance EV travel hassle-free.

Nio’s recent BaaS price cuts (for new and existing owners) improve affordability. The 75kWh pack dropped from 980 RMB/month to 728 RMB/month (with a 70,000 RMB car price reduction); the 100kWh pack fell from 1,680 RMB/month to 1,128 RMB/month (with a 128,000 RMB car price cut). If your usage cycle is 10-15 years or 300,000-500,000 km, leasing may be cheaper—plus, rents could drop further, unlike a one-time battery purchase (whose value may depreciate).

Many dream of ultra-fast charging—5 minutes for 2,000-3,000 km—but that’s sci-fi for now. Even if battery tech improves, power demand will rise. Think of power banks: skeptics said better phone batteries would kill the market, but smartphones grew thirstier, apps more power-hungry, and power banks more essential. If phones struggle with battery life, imagine cars. And if autonomous driving takes off, AI will only increase energy demands—we’d need a dragon’s wish for those fantasy batteries.

Swapping is at least one viable path. Some hype solid-state batteries like Dragon Ball’s magic beans, but full-solid and hybrid are worlds apart—hybrid isn’t disruptive; full-solid is, but it’s high-barrier, far from mass adoption, and won’t turn batteries into miracle beans.

Second, swapping, charging, and energy storage infrastructure is a capital-intensive, long-term play—almost like AWS.

While studying Nio’s earnings, I came across a quote from Ouyang Minggao (CAS academician) on EV prospects, referencing Nio’s 10-billion-RMB annual R&D: "Tech revolutions have three phases. Phase one—building the platform—is costly, like Nio’s heavy R&D. Legacy automakers, with decades of ICE experience, are monetizing their brands. We’re investing; they’re cashing in—hence the contrast."

Nio’s swapping/charging network (see above) has formed an industry moat, likely becoming a defensive barrier. Nio leads China in charging piles and swap stations. Partnerships with Changan, Geely, JAC, and Chery to standardize swapping amplify network effects and moat strength—a "swap alliance" with scale.

In 2024, Nio plans 1,000 new swap stations and 20,000 chargers. Charging remains a bottleneck for EV adoption, but Nio’s heavy investment and alliance expansion will validate its swapping model.

Swap stations also function as energy storage, like AWS—once mature, they can serve external clients. Swapping and cloud services share traits: (1) Strong network effects—swap networks are energy cloud infrastructure. (2) Heavy, long-term investment—like Amazon/Google’s data centers (though swapping’s scale is smaller). (3) High barriers once external services begin. Swapping offers two growth curves: tech-driven market penetration and scale-driven profit.

Third and finally, I believe the pure EV market is entering an explosive phase. Xiaomi’s entry is a "thunderclap," but Bin Ge predicted 2024-2025 as the tipping point for premium EV growth amid accelerated oil-to-EV shifts.

Xiaomi makes it look easy, but it’s been preparing for years—entering the EV market is hard, entering premium harder, and surviving hardest. Apple quit, European automakers delayed electrification (some almost cheating), but the EV shift is irreversible—I hope we agree.

For Nio specifically, catalysts include: (1) Swapping’s payoff curve; (2) High returns from years of tech platform investment (since 2016, Nio has spent over 40 billion RMB—the most among startups—with 8,600+ patents); (3) New brand "Ledao," leveraging existing tech (autonomous driving, cockpit, chassis) for scale; (4) Global expansion—already in Europe (Norway, Germany, Netherlands, Sweden, Denmark) and launching in UAE in 2024.

In summary, as an investment, Nio holds the premium EV market with differentiated competition (BaaS + swapping), strong market share, and clear advantages. Abu Dhabi’s sovereign fund has invested heavily twice, showing conviction. Financially, Nio’s 2023 revenue hit 55.62 billion RMB (+12.9% YoY), a record; Q4 auto gross margin remained industry-leading at 11.9%; cash reserves surged to 57.3 billion RMB. With tech dividends and infrastructure payback nearing, plus historically low stock prices, now is a prime time to invest in Nio.

$NIO(NIO.US) $09866$

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Disclosure: The author holds a long position in Nio.

This article is for sharing only and does not constitute investment advice.