Operational bottlenecks, inflationary pressures, and dubious investor sentiment have left the EV market somewhat stagnant. Manufacturers are cutting production targets and delaying deliveries across the board as more and more companies find themselves grappling with a tough economic climate. Demand for EVs is undoubtedly increasing, but in some places more than others. More and more investors are looking towards the Chinese EV market to cash in on the one-step-ahead climate of EV homogeneity.
Aside from the foreign-made Tesla, the Chinese market is abundant with home-grown brands that are attracting increasing amounts of interest. BYD, Nio, Xpeng, and Li Auto are all Chinese EV staples, but the question still resides as to how companies will tussle over market share. Looking back at January production numbers, it appeared that Nio’s (NYSE: NIO) growth was slowing in comparison to its competition; across annual sales and year-over-year sales for January.
There is a lot going on with Nio behind the scenes. Last month it was rumored the company was working on a mass-market sub-brand vehicle to introduce at a lower price tier than its other vehicles and much of its competition; with manufacturing apparently underway at the company’s Hefei manufacturing base.
Deutsche Bank analyst Edison Yu lowered the firm's price target on Nio to $50 from $70. Although referring to operational bottlenecks, Yu also points out that Nio has a “leading service infrastructure that no domestic automaker has been able to match”. Yu points out that deliveries are on track to increase from 10,000 per month to 25,000 at the end of fiscal 2022.
With deliveries on track for a bounce and domestic demand at all-time highs; this could be the year for Nio, especially as Yu believes, Nio’s ET7 and ET5 are in line to be the most desired cars on the Chinese market this year. Nio is set to release earnings later this week, investors will want to pay close attention to management’s fiscal outlook.
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Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.