Text size
An NIO es6 car is shown at the Beijing Motor Show.
Wang Zhao / AFP via Getty Images
Chinese electric vehicle manufacturer
NIO
watched its stock price drop on Tuesday after reporting a drop in February deliveries that seemed to unnerv investors. But securities analysts were focusing on the global microchip shortage.
NIO’s shares fell about 8% in Tuesday’s midday trading session. The S&P 500 and Dow Jones Industrial Average fell by around 0.3% and 0.1%, respectively.
Wedbush analyst Dan Ives pointed out that the shortage will be a short-term burden not just for NIO (ticker: NIO), but for all of its competitors.
“The chip shortage that impacts the global automotive industry in general, as well as
Tesla
The recent price cuts have affected some positive market dynamics for NIO … although we believe it will be short-lived, ”wrote Ives in a report on Tuesday. He still sees the “jaw-dropping” EV demand in China and expects NIO, and others, to sell everything they do.
Barclays analyst Brian Johnson noted on Tuesday that industry data provider IHS estimates that 1 million cars are at risk of not being produced in 2021 due to a lack of chips.
In a results conference call on Monday, NIO officials said the company has enough chips to meet production targets by the second quarter; Johnson, however, fears that the chips will remain scarce throughout the year.
Global automotive companies manufacture about 90 million cars a year. The IHS data point is a way to scale the chip shortage problem. “IHS noted that the additional supply, which could compensate for the volume lost in [first half 2021], will be postponed until [the fourth quarter] and it will reach 2022, ”wrote Johnson.
Ives and Johnson do not cover NIO, however. Deutsche Bank analyst Edison Yu did. He classifies the company as Buy and has a $ 70 price target for the stock.
Yu believes that despite supply chain problems, NIO could reach 100,000 deliveries in 2021, although it is projecting 96,000. He expects monthly production to rise from around 7,500 to around 10,000 in the summer. “In the long run, we see several areas of untapped growth,” wrote Yu. He envisions more models and NIO cars being sold around the world.
Fei Fang, an analyst at Goldman Sachs, is not as optimistic as Yu. Fang values NIO’s shares as Hold and has a price target of $ 59.
Fang, however, found the quarter solid and was encouraged by the success of the battery as a service business model. NIO will sell an EV without the cost of a battery and then rent the battery to consumers for a monthly fee.
When the service was launched, the monthly fee was 980 yuan, or about $ 140. The fee includes six battery changes per month. Taking variables into account, this is approximately up to 1,500 miles of driving range.
About 55% of new NIO buyers are choosing the rental option and the percentage is growing every month, according to management. Fang wrote that the rental model is improving the use of NIO’s 200 switched stations.
Write to Al Root at [email protected]