Mentioned Companies: NIO, PYPL, SQ, TSLA

#269: The Chinese Government Is Supporting Battery Swapping for Electric Vehicles (EVs), & More

#269: The Chinese Government Is Supporting Battery Swapping for Electric Vehicles (EVs), & More
by ARK Invest, May 10, 2021

1. The Chinese Government Is Supporting Battery Swapping for Electric Vehicles (EVs)

The Chinese Government has announced an EV subsidy for vehicles priced at $45,700 or less for all manufacturers except those offering battery swapping. Electric vehicles incorporating battery swapping will be exempt from the price limit. This policy favors domestic battery-swapping EV manufacturers like NIO as opposed to Tesla which avoided that strategy.

Unsurprisingly, the government is favoring a local Chinese manufacturer, but could this move also suggest that NIO needs help? In our view, such government support could impair NIO’s global ambitions in the long term.

ARK’s research suggests that, with or without subsidies, the economics associated with battery swapping will result in design constraints and shortened battery lives. Encouraging these sub-optimal results, the Chinese Government could limit NIO’s success globally, even more so if the company relies on subsidies instead of aggressive investments in innovation to deliver competitively priced vehicles.


2. Social Networks Are Fueling the Payment Space

More companies appear to be following Cash App’s footsteps and leveraging the viral nature of social media to drive user growth. As highlighted by our research, Cash App has been using artist and influencer giveaways on Twitter to attract new users and build its brand.

Having trailed Cash App’s marketing prowess for years, in the last few months PayPal has featured giveaways on Twitter, though with less viral success. That said, Venmo is wise to step up its social game. While its payment volumes did surge 63% on a year over year basis in the first quarter, Venmo needs to protect its position from creative and aggressive competitors like Cash App as it expands from peer-to-peer payments into crypto, investing, and banking.

We believe one of the contenders in the US digital wallet space is a challenger bank, Current, that has turbocharged its social game with an exclusive partnership with MrBeast, one of the most successful global YouTube influencers. Only 22 years old, MrBeast – Jimmy Donaldson – has gone viral by giving away large sums of money. In the last 30 days alone, his videos have attracted more than half a billion views.

We believe that the lines between and among traditional peer-to-peer payments applications, challenger banks, and investment applications are blurring and consequently, competition is intensifying and driving up customer acquisition costs. Organic viral growth could separate the winners from the losers. While we have found that Venmo was the first successful peer-to-peer payments network in the US and Cash App the first to generate viral growth through social networks, we believe that staying ahead of the competition will require creativity in and around social trends and networks, preferably before influencers like MrBeast scale and become prohibitively expensive.


3. Impact Investing: Is Innovation the Key to Accelerating Progress toward the United Nations’ Sustainable Development Goals?

In 2015, the UN General Assembly formulated and committed to 17 Sustainable Development Goals (SDGs) in a concerted effort to end poverty, protect the planet, sustain economic growth, and lay the infrastructure for peace and prosperity by 2030. Six years later, the UN no longer expects to reach those goals by 2030. According to Francesca Perucci, the UN Chief of the Statistical Services Branch, “Almost all areas where you see progress, if you look at the rate, or the pace of progress, it is never sufficient to meet the targets.” This statement may be true, but it overlooks the role that disruptive innovation could play in changing the pace of progress.

We believe that achieving the UN Sustainable Development Goals is possible. Innovation is the key. Stay tuned for our upcoming white paper.


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