After losing nearly 70% of their value in 2022, shares of Chinese EV (electric vehicle) maker Nio (NYSE:NIO) Broader markets continue to underperform so far this year. While analysts’ average price targets suggest significant upside potential, increasing competition and pressure on margins suggest the stock’s decline may continue at least in the near term.Thank you for reading this post, don't forget to subscribe!
It is important to highlight that Tesla (NASDAQ:TSLA) The aggressive pricing strategy is impacting the profit margins of competitors like Nio. Despite higher car sales for Nio in September and the third quarter, its margins may remain under pressure. Investors should be aware that Tesla’s ongoing price cuts have forced competitors like Nio to offer promotional discounts to increase sales volumes.
As for Nio, the company’s gross margin was 1% in Q2, compared to 13% in the year-ago quarter. Additionally, its vehicle margin stood at 6.2% in the second quarter, compared to 16.7% in the year-ago period. The decline in margins reflects changes in product mix and promotional discounts.
While Tesla’s pricing strategy is hurting its margins, the increasing competition in the EV sector is a cause for concern. Based on Q3 deliveries, Li Auto (NASDAQ:LI) has performed better than Nio in terms of growth. Additionally, Huawei-backed EV company Aito recently announced that it has received over 50,000 orders for its M7 model in less than a month of launch. In response to this news, Nio’s stock saw a decline of 4.36% on October 9.
Is Nio Stock Expected to Rise?
Since Nio stock has lost substantial value, the analysts’ average price target indicates the potential for significant upside from current levels. The company’s focus on large-scale production and ramp-up of new models bodes well for volume growth. Furthermore, its transition to a new car platform and the expansion of its power and service network are seen as positive developments.
However, competitive headwinds and near-term pressure on margins keep analysts cautiously optimistic about Nio stock.
Nio stock has received six Buy and four Hold recommendations for a Moderate Buy consensus rating. Additionally, these analysts’ average price target of $14.24 suggests a 70.74% upside potential from current levels.
While analysts’ price targets suggest significant upside potential for Nio stock over the next 12 months, increased competitive headwinds could hurt its share price in the short term.