To The Moon

Burning Cash and Chasing Dreams

At just under $4 a share, NIO trades like a distressed asset with a luxury complex. It wants to be Tesla-meets-Apple on Chinese roads, boasting sleek cabins, AI co-pilots, and battery swap stations that seem plucked from sci-fi. But look beneath the futuristic polish, and the financials are still parked firmly in the red. With a market cap of $8.37 billion and a trailing twelve-month net loss of over $24 billion, $NIO Inc.(NIO)$ isn’t just burning rubber—it’s incinerating cash.

High-voltage dreams, low-voltage margins

Operating margins sit at a brutal -53.33%, and return on equity is an eye-watering -150.07%. Its balance sheet doesn’t offer much comfort either: a total debt load of 30.35 billion yuan, a current ratio below 1, and a book value per share of -0.17. At a glance, it’s the kind of profile that would make a traditional value investor clutch their dividend statements in horror.

Still, there’s method to the madness. NIO is investing heavily in battery-swapping infrastructure—more than 2,400 stations so far—with a vision to create a seamless, subscription-based EV experience. It’s betting that convenience, not just kilowatts, will win the loyalty of premium car buyers. But with each station costing hundreds of thousands of dollars, the cost of building this moat could drown the castle.

Onvo: A Margin Headwind—or a Fix for Fixed Costs?

To widen its addressable market, NIO launched Onvo, an entry-level brand that takes dead aim at Tesla’s Model Y and BYD’s Song. On the surface, this looks like a potential margin killer. $NIO Inc.(NIO)$ already scrapes by on 10% gross margins, and moving downmarket rarely helps. But here’s where it gets interesting: NIO’s manufacturing footprint is under-utilised. Low volumes mean high fixed costs per vehicle—an unsustainable equation.

Onvo, if successful, could shift that balance. Higher output would improve factory utilisation, dilute overheads, and bring long-awaited operational leverage. It’s the same playbook Tesla ran in its early years: premium first, volume second, profits third. If NIO can follow suit, Onvo might not be the margin drag bears fear—but the scale catalyst bulls are hoping for.

That said, the transition won’t be smooth. The L60 SUV undercuts the Model Y on price and beats it on range, but brand recognition outside China is limited, and NIO’s dealer and service networks are still thin. Execution risk is real—and the company must scale fast without bleeding out.

Europe: A Strategic Headwind or a Wedge Opportunity?

NIO’s global ambitions haven’t gone unnoticed, and it’s already dipped a toe into Europe, targeting EV-forward markets like Germany and Norway. EU tariffs on Chinese EVs certainly complicate this strategy, adding costs and dampening margin prospects. But to dismiss the European expansion as doomed misses the point.

Unlike traditional automakers, NIO isn’t just exporting vehicles—it’s trying to export an ownership model. Its battery-as-a-service (BaaS) offering and swap infrastructure could appeal to drivers who value flexibility, but European consumers are notoriously brand-loyal and sceptical of unfamiliar tech. Without broad public-private partnerships or local buy-in, the infrastructure costs alone may prove a barrier to entry rather than a moat. In short, NIO’s European expansion is bold—but far from a slam dunk.

Don’t Forget the Government Backstop—But Know Its Limits

One piece often overlooked in Western analysis is the role of Chinese government support. NIO doesn’t operate in a laissez-faire vacuum—it operates in a policy ecosystem that actively wants EV champions. From subsidies and tax incentives to cheap credit and land grants, Beijing has made clear its desire to push homegrown EVs to the top of the global leaderboard.

This matters. While the company’s cash burn would normally raise survival concerns, the political tailwinds give it more time and flexibility than a US or European peer might enjoy. That said, the support isn’t unconditional. If NIO continues to rack up heavy losses without showing a credible path to profitability—especially while more efficient peers like $BYD Co., Ltd.(BYDDF)$ or $Li Auto(LI)$ thrive—Beijing’s patience could wear thin. For now, government backing offers a cushion, but not a guarantee.

The Numbers Aren’t Pretty, But the Path Could Be

Yes, NIO’s current profitability profile is atrocious. Net margins of -35.8%, negative EBITDA of 16.4 billion yuan, and returns deep in the red. But context is everything. $Tesla Motors(TSLA)$ in its early years had similarly horrific metrics. What mattered was the trajectory, not the current state.

NIO’s revenue grew 21.5% year-on-year in the most recent quarter. Demand hasn’t disappeared—it’s just fragmented. The key now is scaling delivery without compromising quality or burning more equity. With over 19.7 billion yuan in cash and an enterprise value/revenue ratio of just 1.04, the stock arguably reflects much of the near-term pessimism. That’s not an outrageous multiple for a company with infrastructure, tech IP, and a growing brand presence.

The chart tells its own story: volatility tightening, patience thinning, and a breakout begging for a reason.

Technicals echo the narrative—tight range, loose nerves, latent energy

And then there’s the short interest. Over 12% of the float is shorted, making the stock prone to sudden squeezes on any sniff of good news. A successful Onvo launch, European traction, or even a government capital injection could all catalyse a sharp move.

I’m Not Buying Yet—But I’m Tempted

Risk, meet reward. Place your bets carefully

So where do I land? I’m not diving in head-first, but I’m no longer on the sidelines with arms folded. At $3.90, with a 52-week low of $3.02, much of the doom is arguably priced in. The stock trades more like an option than equity—one with serious downside protection from policy support, and upside linked to disruptive tech, expanding delivery volumes, and a compelling global vision.

For risk-tolerant investors, this might just be the most interesting car crash worth investing in. Yes, the losses are jaw-dropping. Yes, the road ahead is foggy. But if even half of NIO’s big bets pay off, today’s valuation could look laughably cheap in hindsight.

I’m watching with cautious curiosity—and a finger hovering over the ignition key.

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