Does Nio Stand To Benefit From Chinese City Chongqing's Subsidies For Battery Swap Stations?

Chinese electric vehicle maker Nio Inc. (NYSE: NIO) could significantly reduce the construction costs of its local battery swap stations if it can take advantage of the subsidies announced by the Chinese city of Chongqing, cnEVpost reported Tuesday.

What Happened: Chongqing will provide subsidies of up to RMB 500,000 ($78,000) for each battery swap station built and put into operation in the city, according to the report that cited a document released by the city’s finance bureau.

Builders are eligible to apply for subsidies if the annual cumulative number of battery swap stations built and put into service by them in Chongqing reach at least 15, as per the report. However, cnEVpost added it is not sure if Nio is eligible for the subsidy.

The individual cost of Nio’s second-generation battery swap station is reportedly RMB 1.5 million ($236,850), half the cost of the company’s first-generation product. Nio’s battery swap station construction costs will be significantly reduced if it can take advantage of the Chongqing city subsidy, the report noted.

Nio built its first second-generation battery swap station in the city on May 9.

See Also: Nio Grabbed 23% Share Of China's All-Electric SUV Market In April, Ahead Of Tesla's 17%

Why It Matters: Nio is relying on service offerings to make an impact on customers in China. The company has pioneered the concept of battery-as-a-service that would allow users to rent a battery instead of purchasing one, helping to trim the cost for EV owners.

At the NIO Day event in January this year, Nio unveiled its second-generation battery swap station, which can accommodate 13 batteries and has a daily capacity of up to 312 swaps. Nio aims to have 500 battery swap stations in operation nationwide by the end of this year.

See also: How to Buy Nio Stock

However, Ark Invest analyst Sam Korus said in a note earlier in May that government support in the form of subsidies will harm Nio's global ambitions in the long run. The economics associated with battery swapping will lead to design constraints and shortened battery lives, according to the analyst.

Price Action: Nio shares closed almost 1.2% higher on Tuesday at $34.19.

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Photo: Courtesy of Nio