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NIO Buys Stake in Greenwing to Secure Lithium for Batteries

NIO Inc. NIO recently invested in Greenwing Resources, the Australia-based lithium company. The China-based EV maker has agreed to pay $12,000,000 to Greenwing to subscribe for the latter’s 21,818,182 shares at a deemed issue price of 55 cents per share (Placement).

Upon completion of the placement, NIO will own 12.16% of Greenwing and will enjoy the right to be nominated to the company's board of directors as long as it holds at least 10% of the shares.

Moreover, the automaker will obtain a call option to acquire between 20% and 40% of the issued capital of Andes Litio, which holds the rights over the San Jorge Lithium Project in Argentina.

Greenwing will issue a detailed scheme of the San Jorge Lithium Project to NIO, which can implement the option within a year, with the price expected to be between $40 million and $80 million.

At least 80% of the proceeds from the placement will fund Greenwing’s exploration efforts in the San Jorge lithium project, and the remaining amount will aid general working capital and costs of the proposed transaction. The funding will also align NIO as Greenwing’s potential joint venture and offtake partner.

Greenwing is a fully integrated green metals company focusing on producing graphite, advanced materials and lithium.

The move by NIO seems to be a preparatory step to secure battery raw material supplies for the long run.

NIO aims to develop in-house batteries and is driving efforts to set up a battery swap network. Its battery swap technology — which is part of NIO’s BAAS strategy — is a game changer and provides an edge to the firm over peers. The company claims a battery pack can be replaced in its vehicles in about three minutes.

On the latest earnings call, NIO notified that so far, it deployed 1,094 swap stations. Encouragingly, it is expected to increase the total number of battery-swap stations to more than 1,300 by 2022-end. It aims to raise the count to 4,000 by the end of 2025.

At its Power Day 2022, NIO unveiled the 500 kW ultra-fast charging piles to compete with overseas peers. The ultra-fast-charging pile will be coming to Europe and China by the end of 2022. The company has installed 127,528 home charging piles for its customers. In addition to the new fast-charging piles, NIO unveiled its third-generation battery swap stations, which are nearing completion and awaiting installations in late 2022 or early 2023.

By 2025, NIO will have a battery swap network covering nine vertical highways, nine horizontal highways and 19 urban areas in China. The company plans to have more than 4,000 battery swap stations worldwide by 2025, with 1,000 swap stations overseas. NIO also stated that it has completed more than 10 million battery swaps, with a daily average of above 30,000 swaps per day. The company intends to start manufacturing 800-volt battery packs designed in-house by 2024.

To strengthen its battery capabilities, it is likely that the company will need steady access to lithium.

Shares of NIO have lost 49.7% in the past year compared with its industry’s 38.5% decline.

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Zacks Rank & Key Picks

NIO carries a Zacks Rank #3 (Hold) currently.

Some better-ranked players in the auto space are Yamaha Motor Co. YAMHF and Visteon Company VC, each sporting a Zacks Rank #1 (Strong Buy), and Wabash National WNC, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Yamaha has an expected earnings growth rate of 1% for 2023. The Zacks Consensus Estimate for current-year earnings has been revised 5% upward in the past 30 days.

Yamaha’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. YAMHF pulled off a trailing four-quarter earnings surprise of 47.95%, on average. The stock has declined 34.2% over the past year.

Visteon has an expected earnings growth rate of 144.1% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.

Visteon’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. VC pulled off a trailing four-quarter earnings surprise of 400.13%, on average. The stock has risen 14.9% in the past year.

Wabash National has an expected earnings growth rate of 241.1% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.

Wabash National’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed in two. WNC pulled off a trailing four-quarter earnings surprise of 28%, on average. The stock has declined 1.8% in the past year.


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