Nio (NYSE:NIO) is making significant progress with its battery swapping technology. The Chinese electric vehicle (EV) producer has been working toward this initiative all year. As of July 2023, it had installed 1,564 battery swap stations in China, a figure that has since grown to exceed 2,000.
Now, Nio has announced it is partnering with fellow Chinese automaker Changan Automobile to further develop EVs with battery swapping capabilities. After a difficult two quarters, NIO stock could certainly use a new catalyst to drive growth. So far, shares aren’t reacting well to the news. However, this partnership could ultimately help signal the turnaround that Nio needs to continue securing its share of China’s booming EV market.
Given NIO stock’s recent declines, is this the time to buy it on the dip before this new initiative helps shares rebound? Let’s take a closer look at this recent development and assess what investors should be expecting.
What’s Happening With NIO Stock
While NIO stock initially fell this morning, it seems to be on an upward trajectory. As of this writing, it is still down 4% for the day but is currently inching upward. This is a natural reaction to today’s news, as battery swapping progress could help the company save on costs and ultimately become profitable, if Nio encounters no further complications. As Reuters reports:
“The partnership is aimed at helping Nio improve profitability, as it trims its workforce and defers long-term investments to improve efficiency and reduce costs in the face of growing competition, which began after U.S. auto maker Tesla kicked off a price war at the beginning of the year.”
Joining forces with a company like Changan Automobile is a good step toward these goals. The firm may be state-owned, but it is a prominent original equipment manufacturer (OEM). A pioneer in the world of EV battery swapping, NIO has expanded its empire all across China and even to Europe. Swapping batteries has the potential to help spur EV adoption by addressing range anxiety, which will likely make it appealing to electric fleet operators. This puts Nio in an excellent position to corner this important section of the market as it extends its reach even further through this partnership.
While there is still no timeline for when investors can expect to see the joint venture start generating results, investors should be careful to see the bigger picture when it comes to NIO stock. The company is working hard to help usher in an important new phase of EV technology, one that could help make it a winner when battery swapping technology catches on.
The Road Ahead
It’s true that NIO stock has struggled significantly this year, making some investors cautious. But Wall Street analysts remain generally bullish on the company, favoring its cost-cutting initiatives. InvestorPlace contributor Steve Booyens also sees it turning around in 2024, claiming that a “fundamental shift is en route” due to Nio’s status as an undervalued growth play.
If the battery swapping partnership with Changan starts bearing fruit in the coming year, as it easily could, this prediction will likely prove correct.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
