Macquarie downgraded Nio to Neutral from Outperform and cut its price target to $5.30 from $6.70, citing weaker fourth-quarter volume guidance as China phases out government subsidies.
Based on Tuesday’s closing price of $5.50, Macquarie’s new price target of $5.30 implies a downside of 3.6%, turning bearish on the stock.
Q4 Guidance Lowered
Analyst Eugene Hsiao lowered his forecast following Nio‘s announcement that it expects to deliver between 120,000 and 125,000 vehicles in the fourth quarter, down from a previous target of 150,000 units across its Nio, Onvo and Firefly brands.
The midpoint of 122,500 vehicles represents an 18.3% reduction from the earlier guidance.
“Weak Q4 vol. guidance of 122.5k at the midpoint below prev. guidance of 150k partly due to impact from phase out of govt. subsidies on Onvo demand,” Hsiao wrote in a research note.
The revised outlook indicates Nio will deliver fewer than 326,221 vehicles for the full year, falling short of management’s ambition announced late last year to double deliveries in 2025, which would have meant more than 440,000 units.
Subsidy Impact
Nio founder and Chief Executive Officer William Li attributed the guidance cut to the phase-out of China’s trade-in and replacement subsidy program during the earnings conference call.
“We will not be able to see the year-end sales spike driven by the seasonality towards the end of the year, especially this will affect the sales of our cars that have already experienced their new car hype stage,” Li said. “This is also the challenge faced by the entire industry.”
The company’s founder and chief executive said automakers including Nio are providing guarantees for purchasing tax exemptions to customers waiting for their vehicles next year, but no company is guaranteeing the trade-in and replacement subsidy.
“Our Onvo L60 and L90 are majorly affected by this cancellation as they are also relatively low price segment and are more sensitive to such changes,” Li said.
Margin Improvement
Vehicle margins rose to 14.7% in the third quarter as the Onvo L90 and ES8 contributed to a better product mix. Hsiao expects margins to climb to about 18% in the fourth quarter.
Li said three new large SUV models planned for 2026 are “all positioned at the higher end of the price spectrum of their respective segment” and will deliver more significant margin contribution. The models will be fully synergized with the ES8 and L90 from a cost structure perspective.
“With five large models combined, we expect them to contribute to the good product as a good product performance as well as on the margin levels. Overall speaking, achieving 20% of equal margin,” Li said.
“We cut our HK/US TPs by 23%/21% on slower FY26 market demand and apply a peer average 0.8x FY26E P/S. Downgrade to Neutral,” Hsiao wrote.
Stock Performance
Nio‘s US-listed shares closed 4.35% lower at $5.50 on Tuesday following the earnings report released before the market opened.
The stock traded in a range between $5.38 and $5.70 and closed with a market cap value of $12.64 billion.
Wall Street Reactions
Bank of America cut its price target on Nio to $6.70 from $7.60 on Tuesday while maintaining a Neutral rating, saying the stock has already priced in improving margins.
Morgan Stanley maintained its bullish outlook, with analyst Tim Hsiao citing narrowing losses and widening margins.
CMB International said in a research note on Wednesday that Nio will miss its profitability target, expecting a net loss of 1.6 billion yuan ($226 million) in the fourth quarter and a non-GAAP adjusted net loss of 700 million yuan, according to local media outlet CnEVPost.
