Chinese Electric Vehicle Manufacturer Shares NIO (NYSE: NIO) A Wall Street analyst said the company could become the “next iconic auto brand”, at least in China, after the jump on Tuesday.
Is that correct? let’s take a look
Does NIO compare to Tesla in China?
Deutsche Bank analyst Edison Yu originally began coverage of NIO on September 8 with a buy rating and a $ 24 price target. In a new note on September 29, Yu wrote that investors were pushed back to their initial ratings, saying that the company’s brand does not draw the level of enthusiasm and loyalty Tesla And German luxury brands enjoy with Chinese consumers.
Yu admits that there is some truth in this. But, he said, NIO is still a new company, and believes its brand perceptions are heading in the right direction.
Yu said there is “compelling evidence” that a growing number of consumers see NIO as a high-quality premium brand with best-in-class technology and customer service. He mentioned that 62% of NIO’s customers – a high rate – were referred by other customers, and that a recent favorable study scored highly against major brands.
“As [battery-electric vehicle] UO wrote, “Adoption enhances word-of-mouth and we believe that NIO can take a physical stake in the premium segment as consumers begin to understand the value proposition and quality of its products and services.”
Yu feels that, while the NIO may not yet be at Tesla’s level, it is a leading company in the so-called “Fab Four” of Chinese electric-vehicle manufacturers, a group that includes the NIO, Xpeng, Lee auto, And privately held WM Motor. U maintained its buy rating and its $ 24 price target for the shares of NIO.
Could NIO really be the next iconic auto brand?
NIO has arrived long Way in the previous year. The company addressed quality concerns, including a costly recall, a severe cash crisis and a nationwide shutdown amid the COVID-19 epidemic earlier this year. Now, it has a lot of cash in the bank and rising sales – and a growing feeling among auto investors that CEO William Bin Lee and his team have a very good direction.
NIO vehicles feature attractive designs, a long list of high-tech features, good range, and some attractive twists, including a fast-growing network of automated battery-swap stations that can “recharge” an NIO in about 3 minutes Are – and a battery-by-subscription service that reduces the initial cost of purchase. The company has placed a heavy emphasis on customer service, which goes beyond the typical auto-company experience with brick-and-mortar centers to serve as gathering places for enthusiastic owners.
The NIO still has a long way to go. For starters, it has yet to deliver more than 4,000 vehicles a month (though it may be available in September.) It still does not have its own factory up and running – it is another vehicle to manufacture its own vehicles The manufacturer is paying, an arrangement that, if nothing else, eats into its margins.
Upshot: There is risk, but good things are happening here
All told, I think there is a lot here for auto investors. The NIO is still small enough that it is best to think of it as a speculative investment (don’t load the boat, in other words). But I think the company has shown us so much confidence with its progress over the last six or seven months that it will continue well – and if it does, it should win a good share of China’s upscale EV market. That market grows over the next few years.