Key Takeaways: NIO and Geely Holding have reached a strategic cooperation agreement on battery swapping and charging businesses, with a brighter future for the battery swapping business. We maintain our Buy rating and target price of $8.6.
1. Transaction Structure: Geely Holding will use its 100% stake in its subsidiary, YiYi Connect Technology (a commercial vehicle battery swapping service provider), plus RMB 640 million, to subscribe for newly issued shares in NIO Energy. After the transaction, Geely will hold 30% of NIO Energy, while NIO will hold 63.6%, valuing NIO Energy at RMB 16 billion. Geely's shareholding is linked to operational milestones, with a minimum reduction to 20% and a maximum potential increase to 34% through a further RMB 640 million investment. Simultaneously, NIO will subscribe for newly issued shares in Geely's Zhejiang Haohan Energy, holding 10% of the shares, with the funds used to purchase NIO's charging assets.
2. Nomura's View: Geely may launch battery swapping models in the future, exploring the Battery as a Service (BaaS) model. This will accelerate NIO's battery swapping infrastructure coverage. The integration of charging assets will improve the operational efficiency of both parties. This is another example of cooperation among Chinese automakers in September, following the potential collaboration between GAC and FAW. The industry is shifting from competition to cooperation and sharing, which is beneficial to overall operational efficiency. NIO's new models, such as the ES9, have already shown good performance, and if demand recovers, they are expected to achieve good results in the high-end market. (Nomura report, September 28)
