NIO : Are Analysts Growing Bearish ?

Wall Street analysts are becoming more and more pessimistic about Nio (NIO). The Chinese manufacturer of electric vehicles has been the last month in the red. Now it faces many obstacles and plenty of experts are quickly losing faith. Bearish coverage of Nio (NYSE:(NIO) may not be slowing down as the tide rises. The Chinese EV maker, in particular, is losing favour on Wall Street as its shares continue plummeting. The latest report from analyst Eunice Lee of AB Bernstein, repeats a “hold” rating but the price target is lowered from $7.50 to $5.50. Currently, shares are trading at $5.64, but if this trend persists, they will probably go down even more.

Disappointing Q4 of 2024

It is indeed the case that Nio had lower than expected revenues in the Q4 of 2024. However, the experts seem to believe that the company’s challenges extend beyond the inability to meet expectations. Many analysts have lowered their price targets of the NIO shares over the first week of March. It is becoming clearer that worse times are to come as the underperforming company struggles to transcend its domestic market that is full of competition and an international arena that may not always be conducive to EVs from China.

Wall Street cuts NIO stock price targets

In addition, Bernstein is not the only investment bank on Wall Street to cut their NIO stock price targets. On the other hand, Barclays analyst Jiong Shao has announced a $5 price target with an “equal weight” rating, while Tina Hou from Goldman Sachs has maintained a “hold” position but reduced the price target from $8.40 to $7.40. This may seem positive compared to NIO’s current share prices, but in general, this is a negative opinion of the stock. Two weeks ago, JPMorgan Chase analysts as well, put forward $5 price target while downgrading the shares to an “underweight” rating.

Nio has seen better days. It is not difficult to recall the days when industry players claimed it would lead the booming Chinese EV market. However, the stock has been experiencing a gradual downward trend since the beginning of the year as investors have fled due to the company’s poor fundamentals. Now, the problems with its growth strategy are doing their thing, creating a new uncertainty that was not there before.

“In order to stay in the competition and perhaps expand the firm EV sales, Nio may employ a price-slashing strategy,” InvestorPlace‘s Louis Navellier wrote. In the wake of Nio’s current crisis, the last thing they should be involved in is creating cars that people cannot afford, he explained.

NIO’s Supercar EP9

Nevertheless, Nio has presented a supercar, named EP9, with a $3 million retail price. No, that is not a typo. Several resources confirm the weird $3 million value of the EP9.

You cannot look the other way if Nio is being confronted by bigger, more superior competitors. BYD Company (OTCMKTS: BYDDY) continues to be a market leader in China, while Tesla, despite its faults, is a big threat. 

NIO is not ready to compete for a share in the country’s luxury EV market especially with a $3 million supercar. It should follow Navellier’s words and produce low-priced EVs that are affordable to Chinese drivers who can’t spend $3 million per one vehicle. Wall Street has recognised what is an error in Nio’s growth plan and it is revising its NIO stock price targets differently.

NIO partners with CATL

While some analysts may be pessimistic about NIO, the company remains focused on the future. On the 14th of March, Nio announced its partnership with CATL to develop long-life batteries for its battery-swap services. Nio also stated that it will unveil a new EV brand, Onvo, in May 2024.

Nio and CATL will work on the battery systems with a longer life cycle which will be realised in Nio’s future battery-swapped cars. Nio stated that CATL is the intellectual property owner of artificial SEI and other core technologies required for long-lived batteries.

Nio specified that the average warranty period for EV batteries is eight years. It is expected that about 20 mil EVs will reach the end of their warranty period from 2025 to 2032. Car owners will experience difficulties of finding solutions during the lifecycle of EVs and their batteries which might cause very high replacement costs.

With 2,300 swapping stations worldwide, Nio said it has even advanced to be the world’s No.1 battery-swapping network operator for intelligent EVs globally. It has collaborated with Changan Automobile, Geely, JAC Group, and Chery Automobile for battery swap services.

Nio has developed an operation system which embraces the entire battery lifecycle. The system uses swapping services based on battery data for the purpose of lengthening the life of batteries. The company also focuses on developing electrolytes, cathode, and anode materials as a way of extending batteries lifespans.

Second EV brand

Nio has so far been busy with preparing the launch of the second vehicle brand, known inside the company as the Alps. At an event on 14 March, Lihong Qin, one of Nio’s co-founders and presidents, said the new brand will be Onvo and will be founded in May, according to China-based National Business Daily.

Nio’s founder, chairman, and CEO William Li announced that Onvo, which will target the family car market and primarily focus on sales growth, will be Nio’s second brand, and Nio will be more concerned with the gross profit margin.

Nio will introduce their first Onvo EV model in the third quarter and begin large-scale deliveries in the fourth quarter. At an earnings call in early March, Li suggested that the vehicle would directly compete with Tesla Model Y and hold a 10% lower production cost.

Li states that Onvo’s second model car will be an SUV for a large family, according to him. He said that the car would be available in 2025. Onvo has managed to create the third model as well.

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