Nio (NYSE:NIO) has announced a new partnership with Contemporary Amperex Technology Co., Limited (CATL). The partnership will see the two companies team up in order to create long-life batteries that will improve Nio’s battery swap services.
Nio and CATL have worked closely in the past and previously announced a five-year cooperation agreement regarding technological improvements, new brands, and international expansion in 2023.
“One of the most important problems that has fundamentally not been solved nor attracted widespread attention is battery life,” said Nio CEO William Li. “This is not only a problem that Nio needs to solve, but one that the whole industry must work together to solve.”
NIO Stock: Nio Announces Longer Life Battery Partnership With CATL
According to SNE Research, CATL has led the global electric vehicle (EV) battery market for seven consecutive years and had a market share of 36.8% last year. No other battery manufacturer had a market share of over 30%. This has led to economies of scale efficiencies and should help Nio lower the costs of its batteries.
Generally, warranties for EV batteries last for about eight years. Nio’s swappable batteries are able to retain 80% of their capacity after 12 years. The company currently boasts 2,382 swapping stations and 21,652 public charging stations.
Cutting production costs is a major goal for the Chinese EV company. In 2023, Nio reported a net loss of $2.918 billion, up by a significant 43% compared to 2022’s net loss. That’s pretty bad. Meanwhile, the gross margin fell to 5.5% from 10.4%, while vehicle margin fell to 9.5% from 13.7%. This came as vehicle sales grew by 8.2% to $6.937 billion.
Yes, Nio is growing, but it hasn’t shown the ability to retain its revenue. Its unclear how the new partnership with CATL will affect its margins, although it should give them a boost.
At the same time, Wall Street analysts are still bullish on NIO stock. Sixteen analysts cover the company with an average price target of $9.15, implying an upside of over 60%. Citi has the highest price target at $19.20, while JPMorgan Chase has the lowest at $5.
On the date of publication, Eddie Pan did not hold (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.
