NIO acquires stake in Greenwing to secure lithium for batteries

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NIO inc. NIO recently invested in Greenwing Resources, the Australia-based lithium company. The China-based electric vehicle maker has agreed to pay Greenwing $12,000,000 to subscribe for Greenwing’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 have the right to be appointed to the company’s board of directors as long as it owns at least 10% of the shares.

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

Greenwing will release a detailed schematic of the San Jorge Lithium project to NIO, which can implement the option within a year, with a price that is expected to be between $40 million and $80 million.

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

Greenwing is a fully integrated green metals company focused on the production of graphite, advanced materials and lithium.

NIO’s decision appears to be a preparatory step to secure the supply of battery raw materials in the long term.

NIO aims to develop in-house batteries and is leading efforts to establish a battery exchange network. Its battery-swap technology – part of NIO’s BAAS strategy – is a game-changer and gives the company an advantage over its peers. The company claims that a battery can be replaced in its vehicles in about three minutes.

During the latest earnings call, NIO announced that so far it has deployed 1,094 exchange stations. Encouragingly, there are plans to increase the total number of battery swap stations to over 1,300 by the end of 2022. It aims to increase the number to 4,000 by the end of 2025.

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

By 2025, NIO will have a battery exchange 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 globally by 2025, with 1,000 swap stations overseas. NIO also said it performed more than 10 million battery swaps, with a daily average of more than 30,000 swaps per day. The company intends to start manufacturing 800-volt batteries designed in-house by 2024.

To bolster its battery capacity, the company is likely to need regular access to lithium.

NIO shares have lost 49.7% in the past year compared to its industry’s 38.5% decline.

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Zacks ranking and key picks

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

Some higher ranked players in the automotive space are Yamaha Motor Co. YAMHF and Visteon Company VC, each sporting a Zacks Rank #1 (Strong Buy), and Wabash National WNC, wearing a No. 2 (buy) Zacks rank. You can see the full list of today’s Zacks #1 Rank stocks here.

Yamaha forecasts a 1% earnings growth rate for 2023. The Zacks consensus estimate for current-year earnings has been revised upwards by 5% in the past 30 days.

Yamaha’s earnings have exceeded the Zacks consensus estimate in three of the past four quarters and missed one. YAMHF has realized a surprise on earnings for the last four quarters of 47.95% on average. The stock is down 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 over the past 30 days.

Visteon’s earnings have exceeded the Zacks consensus estimate in three of the past four quarters and missed one. VC realized a surprise on earnings for the last four quarters of 400.13% on average. The stock is up 14.9% over the past year.

Wabash National has an expected profit growth rate of 241.1% for the current year. The Zacks consensus estimate for current year earnings has remained constant over the past 30 days.

Wabash National’s earnings have topped the Zacks consensus estimate in two of the past four quarters and missed two. WNC realized a surprise on the profits of the last four quarters of 28% on average. The stock is down 1.8% over the past year.

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