Why BofA Is Bullish On Nio's Battery Leasing Service

NIO Inc NIO has launched a battery-as-a-service subscription model under a new entity, Battery Asset Co., in which it will hold a 25% equity stake.

The company will own battery assets and lease them to users who subscribe to the BaaS model, which will enable NIO to broaden its addressable market, according to BofA Securities.

The Nio Analyst: Ming Hsun Lee maintained a Buy rating on Nio with an $18 price target. 

The Nio Takeaways: When purchasing an electric vehicle, users can take a monthly subscription on the battery pack under the BaaS model and get a discount on the original price, Lee said in a Thursday note. (See his track record here.)

The pricing under the BaaS model is competitive in the premium electric vehicle segment, the analyst said. 

"The BaaS model would enable NIO users to enjoy lower initial purchase prices, flexible battery upgrade options (to 100kWh battery pack which will be launched later this year) and assurance of battery performance."

Nio's flexible sales model and battery solution could not only broaden its addressable market, but also strengthen its competitive position, enhance its brand equity and lower the burden on its balance sheet, according to BofA. 

NIO Price Action: Shares of Nio were trading higher by almost 2.61% to $14.14 at last check Friday.

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Photo courtesy of Nio.