Shares of Nio Inc. (NIO) are up 0.84% in mid-day trading on Monday after Jefferies reiterated a Hold rating on the stock. The electric vehicle maker prides itself as a premium brand, targeting a smaller subset of customers in the RMB300-600k price bracket. Its premium market positioning has prevented the company from scaling volumes and lowering unit costs as quickly as its more mass-market rivals.
NIO’s ET5 has been one of the hottest cars in the market. However, deliveries only reached 1,609 vs the expected 10k in October due to supply chain bottlenecks. At NIO's 3Q conf call, the company said it had lost RMB4.1b, or the equivalent of RMB131k per car, but chairman Li Bin believes that NIO can break even by 4Q23 with gross margins rebounding to 20-25%. Jefferies believes that this is unlikely as Lithium prices will likely stay higher than Nio’s forecast. According to the company, every RMB100kt change in the lithium price results in a 2ppt change in GPM. Also, R&D prices are likely to stay high as Nio continues to invest in vertical integration.
By Michael Elkins | Michael.Elkins@streetinsider.com