Nio (NYSE:NIO), the Chinese luxury electric vehicle (EV) maker, is testing faster battery swap stations. NIO stock is up almost 3.5% in early morning trading.
The company believes the swaps, which let a car maintain its driving range between charges, give it an advantage in a market dominated by Tesla (NASDAQ:TSLA).
The new stations can change out a battery in just five minutes. A Tesla Supercharger takes 15 minutes to add 200 miles to a car’s range.
Swap or Charge?
Nio was founded in 2014 specifically to take on Tesla in the market for luxury electrics. But it has taken a different approach to scaling, signing long-term supply contracts and taking support engineered by the Chinese government.
Nio already has over 1,300 swap stations, mainly in China, which take about a half-hour to replace a battery pack. It wants to have 2,300 such stations by the end of the year, including 900 fast-swapping stations. Each of the new stations can store 21 battery packs.
The swaps solve two pain points for electric car customers. They’re faster than a charge and maintain a car’s range. Lithium batteries take less-and-less charge as they age, just as a phone that ran five days when you bought it may need to be recharged every day a year later.
China’s electric car market is the world’s largest and a testbed for what will happen globally as EVs scale. In addition to its battery-swap technology, Nio only offers car leases in Europe so that luxury car travel can be seen as a service rather than a product.
China’s domestic market also has many mid-market electrics, priced at $30,000 and less, which middle-class families can afford. In the U.S., almost all electric cars cost over $50,000, and middle-class consumers are buying hybrids.
NIO Stock: What Happens Next?
Nio is the most interesting alternative to Tesla on the high end of the market. The idea of leasing and quickly swapping batteries when needed will appeal to luxury consumers. Whether that’s a mass market opportunity remains to be seen.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
