Written by Cláudio Afonso | LinkedIn | X
Morgan Stanley analyst Tim Hsiao released a new research note on Nio commenting on the launch of Onvo, the new subbrand of Nio. The firm has a price target of $10 implying an upside potential of 73 percent as of the release of the note.
On Thursday, Nio officially unveiled its subbrand named Onvo with the pre-sale price of its first model starting at 219,900 RMB, 30,000 RMB cheaper than the Tesla Model Y.
Morgan Stanley commented on the launch saying L60, the first model of the brand, is “cheaper than expectations” adding that it’s “worth monitoring if the launch of Onvo brand could enable Nio to meaningfully scale up volume sales and achieve better unit economics”.
The analyst says the stock “might see near-term profit taking after recent rally (+27 percent vs. HSI +15 percent over past 1 month) in the wake of Onvo launch, the most important catalyst”.
Morgan Stanley added that investors will “keep a close watch over the order momentum of the Nio brand in May/June” but also the pre-orders for the Onvo model.
“While the launch event appears successful and Onvo L60 looks compelling in terms of pricing and specs, investors would also keep a close watch over the order momentum of the Nio brand in May/June and the pre-order progress of Onvo to gauge the potential re-rating opportunity for the stock,” Tim Hsiao said.
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When comparing to the main competitor, the world’s best selling car Tesla Model Y, the analyst enhanced that the L6o provides a “larger space/legroom, a heads-up display (HUD), 900V charging, and the long-range version comes with 1000km range”.
“L60 will start at Rmb219.9k, more aggressive than market’s previous expectations of Rmb230-250k. L60 will commence delivery in September, where it could start at a lower price for users opting for BaaS (battery as a service) subscription, similar to NIO models. As a B-segment SUV targeting Tesla’s Model Y, L60 comes with larger space/legroom, a heads-up display (HUD), 900V charging, and the long-range version comes with 1000km range,” he noted.
Regarding the Autonomous driving capabilities, Morgan Stanley sees the use of the Nvidia Orin chip as a key feature “to staying competitive in the Rmb200-300k segment among EV startups and tech players”.
“Vision-based ADAS solution debuts on L60: L60 will adopt a vision-based ADAS solution using 1 Nvidia Orin chip, compared to 4 Orin chips + 1 Lidar for existing NIO models. That said, nationwide city NOA (navigate on autopilot) features will remain available on L60, which we think will be key to staying competitive in the Rmb200-300k segment among EV startups and tech players. Meanwhile, we would closely monitor whether next-generation models under the NIO brand would adopt similar vision-based ADAS solutions, which could underpin substantial ADAS hardware cost savings,” the firm explained.
“The make-or-break: While Nio’s order momentum picked up in 2H of April on the back of multiple promotion campaigns and replacement stimulus following the launch of 2024 facelifts, the launch of Onvo would hold key to get the momentum one level up from 4Q and beyond. Nio’s management previously targeted to open 200 stores and achieve 600 vehicle sales/month per store initially,” the analyst wrote.
“While the margins of Onvo remain uncertain, we think the brand is strategically critical to further enhance NIO’s scale benefit, cash flow, its influence into lower-tier cities, and the prevalence of the BaaS ecosystem,” Morgan Stanley concluded.
On Wednesday, JP Morgan analyst Nick Lai upgraded the firm’s rating on Nio shares from Underweight to Neutral while raising the price target from $4.80 to $5.40.
The analyst highlighted the volatility in the stock over the last months as the company introduced lower prices for the battery swap fee in China.
In a new research note, the analyst cites the Chinese government’s stimulus policy and the lowered prices of Nio’s battery swap fees in China as the two main positive developments.
Written by Cláudio Afonso | LinkedIn | X
