Written by Cláudio Afonso | LinkedIn | X
Citi analyst Jeff Chung published a research note on Tuesday detailing insights from a discussion with Nio’s management about the company’s plans for the next years. These include delivery targets, a roadmap to achieving its first full year of profitability by 2026, and strategies to improve margins by integrating in-house technology into its NT3.0 vehicle platform starting from 2025.
Chung reaffirmed a Buy rating for the stock with a price target of $8.90, suggesting a potential upside of approximately 102% from Monday’s closing price of $4.41. The analyst had raised the firm’s price target in late September from $7 to $8.90, eyeing Onvo’s strong order intake in China’s Golden Week Holiday and its potential to “strengthen investor confidence in Nio’s second sub-brand Firefly.”
In his research note, Citi’s analyst detailed Nio’s management’s strategy for achieving group-level breakeven by 2026, which includes sales targets and cost controls.
“Mgmt. targets group-level breakeven in 2026, supported by (1) Nio brand reaching monthly sales of 25k units with an ASP [average selling price] of Rmb350k [$48,120] and a GPM [gross profit margin] of 20%, (2) Onvo brand achieving monthly sales of 35-45k units with an ASP of Rmb220-250k and a GPM of 15%, and (3) limiting R&D growth to less than +10% YoY and controlling SG&A [Selling, General, and Administrative] expenses in 2026,” he wrote.
The analyst said Nio brand “aims for a 10-20% year over year sales increase in 2025” adding that the management indicated that the next-gen Nio models launching in 2025 will feature lower pricing and higher GPM,
The gross profit margin growth will be “primarily due to (i) the adoption of self-developed chips (costs reduced by Rmb10k [$1,375] per car compared to using 4 Nvidia Orin chips), and (ii) partial adoption of Onvo suppliers to further reduce costs”.
Following the announcement of last month’s deliveries, the electric vehicle maker has increased incentives for the last month of 2024, including price adjustments on the vehicle’s interior, loyalty benefits, and trade-in offers.
Commenting on the sub-brand Onvo, the analyst said the company expects deliveries to double from 10,000 units in December to 20,000 in March next year while reaching between 30,000 and 50,000 in the second half of 2025 once it has launched the two new SUVs.
At Nio’s third-quarter earnings call, founder and CEO William Li said the company “is very confident” about the product lineup, adding that volume will double next year as Nio sales will include the two sub-brands Onvo and Firefly.
Regarding the gross profit margin (GPM) for the Onvo models, Chung said that Nio management expects “to exceed 10%” in March and increase to 15% one year from now, in December 2025.
“Onvo’s ADAS hardware cost – Per mgmt., the ADAS [Advanced Driver Assistance Systems] hardware cost per car of Onvo brand is slightly higher than Rmb10k [$1,375],” the analyst added.
As reported by EV on Tuesday, Chung disclosed — citing Nio‘s management — that Onvo’s slower-than-expected production ramp-up was caused by battery supply constraints from BYD, which was only able to deliver 5,000 to 6,000 units per month in October and November.
Chung stated that the sub-brand currently operates over 100 stores and plans to expand to 500 by mid-2025. The battery swap network is expected to grow from the current 600 stations to 1,000 by March next year and 1,500 by June.
On Tuesday, the same day the research note was released, Nio shares closed 5.45% higher at $4.64.
The Shanghai-based company announced during its third-quarter earnings call on November 20 that it expects to deliver between 72,000 and 75,000 vehicles in the current quarter. With a total of 20,976 vehicles delivered in October across its Nio and Onvo brands, the guidance implies the company anticipates delivering between 51,024 and 54,024 units in November and December combined.
Following the November numbers, the company needs now to deliver 30,449 vehicles in December to reach the low end of the guidance it provided.
Written by Cláudio Afonso | LinkedIn | X
