Nio (NIO) stock rallied about 11% on Tuesday, fueled by optimism around the Chinese electric vehicle (EV) maker’s Onvo L90 sports utility vehicle (SUV). Nio began pre-sales of the Onvo L90 SUV on July 10, saying that deliveries of this new model would commence on August 1 in the Chinese market. NIO stock has rallied about 47% over the past month, as investors expect the new model to drive higher sales.
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Citing a post on Weibo (WB), many media outlets noted that the dynamic test drives of the Onvo L90 will be fully launched today. Nearly 600 test-drive vehicles will be available in over 400 Onvo showrooms across 140 cities.
High Expectations from Nio’s Onvo L90
Nio is launching the Onvo L90 SUV at two price points – a $39,000 complete model and a $27,000 battery-as-a-service model. Notably, Onvo is Nio’s affordable sub-brand. Nio is targeting large families with the launch of its new, pure-electric three-row SUV. Investors expect the Onvo L90 to boost sales, while enhancing the company’s business via the high-margin service-based revenue.
The launch of Nio’s Onvo L90 comes at a time when rival Li Auto (LI) is gearing up for the rollout of its Li i8 on July 29, the company’s first pure-electric SUV. Competition is intense in the Chinese EV market, and players are trying to undercut each other through lower prices and discounts.
Earlier this month, Morgan Stanley analyst Tim Hsiao reiterated a Buy rating on NIO stock with a price target of $5.90, noting strong preorder intake for Onvo L90, which reached 30,000-35,000 units, according to his firm’s channel checks. The analyst added that this pre-order intake remains below Onvo L60’s more than 60,000 level back in Q3 2024. That said, he contends that the market’s volume expectations for L90 appear way lower, given “L90’s higher price tag and L60’s unsatisfactory execution at its launch.”
Hsiao views Onvo L90 as a highly competitive model in the sub-RMB 300,000 segment due to its superior interior space and specs, and especially if the official price is fixed lower than the model’s pre-sale price. Consequently, the analyst sees upside to L90 volume. He believes that exceeding monthly sales of 5,000 units seems like a low bar to beat. “Not yet a blue sky scenario…quality execution remains imperative,” said Hsiao.
Is NIO Stock a Buy, Sell, or Hold?
Nio’s June deliveries rose 17.5%, driving a 25.6% growth in Q2 deliveries to 72,056 vehicles. While new models and the company’s cost control efforts are helping in improving investor sentiment, concerns about profitability remain.
Amid intense competition and macro uncertainties, Wall Street has a Hold consensus rating on NIO stock based on two Buys, six Holds, and one Sell recommendation. The average NIO stock price target of $4.50 indicates a possible downside risk of 10.2% from current levels.
