Chinese electric vehicle (EV) maker Nio (NIO 8.72%) has been a success story, bouncing back from a near-death experience in early 2020 to deliver over 160,000 EVs last year.
But with China's EV market slumping, Wall Street is getting concerned. Analysts at Mizuho Securities opened the week by cutting their bank's rating on Nio's American depositary shares to "neutral," from "buy," with a price target suggesting only a modest upside.
Mizuho cut Nio to "neutral" on concerns about slipping demand
Mizuho's analyst Vijay Rakesh wrote that while the longer-term trend toward EVs remains intact in China and elsewhere, slipping demand and tightening liquidity are creating challenges for EV makers that will persist into next year. The bank's team sees EV sales decelerating faster than they had expected: They now forecast just 15% growth in 2024, down from 25% previously.
In addition to the cut to "neutral," Mizuho lowered its price target on Nio's U.S.-traded shares to $5.50, suggesting the stock has only about 12% upside over the next 12 months or so.
Nio had a solid 2023, but 2024 is very different so far
While Nio's deliveries were up nearly 31% in 2023 from 2022, 2024 has been a different story so far. The company delivered 18,177 vehicles in the first two months of this year, down 12% from the same period in 2023.
While other companies selling EVs in China have recently lost ground to BYD's excellent lower-cost offerings, Nio's products are more upscale by design and priced accordingly. In theory, that should insulate it somewhat from BYD and other lower-cost players.
But in practice, it may mean Nio will have to fight harder -- or discount more heavily -- to sustain sales. Investors should be cautious in the near term.
