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Creating my own ARKK Innovation ETF #1 - NIO

NYSE: NIO

NIO (car company) - Wikipedia
A bit of an intro : I'm not a trader and I have to say I'm a beginner at this. I'm sharing my investment story as I go. These are not my main investments (As mentioned on my other post, I'm more into index investing). However, I do like to take risks once in a while. Some of them paid off, some don't.

What is Nio?
Nio is a electric car startup from China 

I decided to buy NIO shares for $6.89 after weighing the pros and cons.

PROS:
  • Have just secured funding from Hefei municipal investment arm. I believe the funding is to the tune of $1 billion. I must admit I didn't check their financials as my investment amount is quite minuscule. (I'll get to this by this weekend).
  • Tencent increased their stake to 15% in Nio (It's always good news when Tencent is involved. Afterpay ( ASX: APT) quadrupled after Tencent investment was unveiled. Do note that Tencent, like Softbank is probably investing in tens if not hundreds of startups in an effort to pick future winners. So far, Tencent has been quite successful.
  • Baillie Gifford also invested in Nio. They're quite optimisitic on Nio.
  • China's shift toward electric vehicles. In some cities, like Shenzhen, the queue for electric vehicle vehicle number plate is much shorter than conventional vehicle plate. To the point of impossible to buy a conventional vehicle.
  • Nio has battery swapping stations. So theoretically, if you drive a Nio in China, you can swap your battery with a new battery instead of waiting for an hour to be recharged (As currently happening to BYD taxis). This is a chicken and egg problem, the more Nio battery swapping stations the more likely people to buy Nio. Btw, Nio cars are not cheap. They start from US$65,000. It's clear that these cars are for affluent upper middle income urban Chinese (Most likely tech bros). 
  • Another positive point for Nio is their cars qualify for Chinese EV subsidy program. This is despite their cars selling more than 300,000 yuan cut off. Prices for the Nio ES6 currently start at 358,000 yuan, the larger ES8 costs at least 468,000 yuan. This is due to exception made for cars with standardised replaceable battery (link).
CONS :
  • While it's easy to write Nio as China's Tesla, Nio is not really a electric vehicle manufacturer as they don't manufacture the car themselves. While this could probably lower cost, it could have repercussions down the line for them (Think Apple vs Android). Tesla is quite notorious for difficulties they faced in production.
  • Competitors aplenty. Tesla has just entered Chinese market. They also have to fend off Geometry from Geely (A much bigger carmaker), BYD, Byton and Xiao Peng. Couple that with reportedly decreasing subsidy from Chinese government for EVs.
  • Possibility of being delisted by NASDAQ due to worsening US-China relationships.
  • Cash burn rate seems high. There is a negative vehicle margin. Vehicle marginwas negative 7.4%, compared with negative 6.0% in the fourth quarter of 2019 and negative 7.2% in the same quarter of 2019

I also watched Dongxii's video (video here ) and I kind of agreeing with his opinion. Anyway, one of these days, I may reveal what my whole portfolio looks like but may not be too soon.
DannyData also did a very good video on Nio (video here)

Frankly speaking I don't invest much here. It's more like a punt. I'd keep it for a few years. I would not lose sleep even if I were to lose all my investments here. If they are to take off, there's always an option to invest more. If they don't so be it. Many of us bought phones priced at hundreds if not thousands of dollars anyway. I'm inspired to do these series of investments after learning about ARKK ( ARK ETF TR/INNOVATION ETF). Do read up on it if you can.

As always do your own due diligence.

UPDATE (From Dongxii) :
Today China EV Startup NIO announced the June deliveries:
  •  NIO delivered 10,331 vehicles in the three months ended June 2020, exceeding quarterly guidance.  Q1 2020 deliveries were 3,838 and Q2 2019 were 3,553
  • NIO delivered 3,740 vehicles in June 2020 setting a new monthly record
  • Cumulative deliveries of ES8 and ES6 reached 46,082

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