Chinese luxury electric vehicle maker Nio has launched its lower-priced Onvo brand, unveiling its first vehicle to compete with Tesla’s Model Y crossover. The new vehicle is priced at RMB 219,900 yuan, approximately 10% below Tesla’s Model Y in China, and is set to go on sale in September. Nio plans to expand the Onvo brand by introducing one new model each year, with the next model aimed at larger families. The new vehicle offers more space than the Model Y and has lower average energy consumption, making it an attractive option for consumers.
Nio has faced challenges in the EV market in China, falling behind competitors such as Li Auto in terms of deliveries. While the company has seen some growth in recent months, it remains to be seen how well it will fare in the crowded market. The Chinese EV market is highly competitive, with over 100 brands vying for market share. Additionally, there has been a price war among players, with Tesla and others reducing prices multiple times in the past year while scaling back production.
NIO’s stock has experienced a significant decline, dropping 90% from its levels in early 2021. The stock has underperformed the S&P 500 for the past three years, with negative returns in 2021, 2022, and 2023. In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period. Despite the challenging market conditions, Nio is looking to recover and potentially outperform the market in the future.
Amidst an uncertain macroeconomic environment with high oil prices and elevated interest rates, Nio faces the question of whether it will be able to rebound and outperform the market in the coming months. While there are concerns about global EV demand, the Chinese market shows promise, with new-energy vehicle sales increasing by 33% in April compared to the previous year. The Chinese government’s support for the EV industry, including incentives for consumers to switch to electric and low-emission vehicles, could benefit companies like Nio.
Nio is focusing on cost-saving measures, such as purchasing batteries from BYD and expanding its EV charging infrastructure, to gain a competitive edge in the market. The company’s stock is currently trading at around $5.30 per share, approximately 1x consensus 2024 revenues. By carefully navigating the market and leveraging its strategic partnerships, Nio aims to position itself for success in the evolving EV landscape. Investors can look at Trefis’ analysis of Nio, Xpeng, and Li Auto to gain a better understanding of how Nio’s stock compares with its rivals in the Chinese EV market.
