For a year, the stock price of Chinese electric vehicle (EV) maker NIO (NYSE: NIO) seemed to be out of gravity.
NIO shares surged to $22.59 on September 30, an all-time high. As of Friday's close, the shares stood at $21.18. So far this year, NIO's shares have risen 428%.
A year ago, NIO founder William Li Bin was called the worst man in China in 2019 in local media reports.
NIO posted a net loss of RMB 11.4 billion in 2019 and had several spontaneous combustion incidents.NIO also spent about RMB 500 million to recall 4,803 faulty ES8s, hitting the company's brand hard.
At that time, negative news such as the bankruptcy and liquidation was rife, and many factors caused the stock price to fall to its lowest point since its IPO.
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Deutsche Bank had previously issued two reports expressing strong optimism about NIO, saying that the company may become the next iconic auto brand, and gave a price target of $24.
The Deutsche Bank report mentioned that NIO's net referral rate is even higher than that of BMW and Mercedes-Benz, which is the highest among the mainstream passenger car brands in China.
On the technology development front, NIO will officially unveil the all-electric sedan EE7 at the end of this year, with an improved hardware sensor suite that will enable L4-level autonomy by 2022.
The Deutsche Bank report expects NIO to report record deliveries and profits in the third and fourth quarters.
This is mainly due to three recent moves by NIO: the start of deliveries of its new model SUV EC6, the launch of the 1000KWH battery pack and battery rental service BaaS, which further stimulated the market.
Meanwhile, the JAC plant finally completed its capacity ramp at the end of August, achieving a full supply chain capacity breakthrough, the report said.
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In the long run, with the increase in the penetration of pure electric vehicles and the increase in word of mouth, consumers will be more aware of NIO's products and services, Deutsche Bank analysts believe that NIO can occupy a higher share of the high-end market.
Deutsche Bank analysts believe that NIO is a new brand, although sales are not yet comparable to Tesla, but it has already gained a wave of good word of mouth in the market.
The Deutsche Bank report highlights that NIO's customer referral rate has risen to 62% in the first half of 2020 (52% in 2019).
Based on a Bitauto (leading automotive web portal in China) study tracking the Net Promoter Score (measurement of how likely a customer is to refer a brand to others) of car brands in the first eight months of 2020, NIO was both the highest-ranking premium brand and overall brand (54%), coming in ahead of Tesla (52%) and BMW (42%), the report said.
NIO's impressive results are inextricably linked to its aggressive marketing and extreme service.
From 2016 to 2018, NIO spent a total of RMB 8.831 billion on sales management, wanting to build the NIO ecosystem through user operations, combined with offline experience stores and online apps.
The exquisite coffee pulls in the experience store, spending 80 million yuan to host concerts for the car, ES8 and ES6 owners lifetime free battery replacement service, a series of measures to give NIO the user perception of high service quality.
According to a report released by market research firm J.D. Power, NIO is the best quality electric vehicle sold in China, ahead of the Tesla.
In terms of the number of problems per 100 vehicles, NIO ranked first with 109, and Tesla ranked second with 113, according to J.D. Power's 2020 China New Energy Vehicle Experience Study SM (NEVXI).
NIO is China's best quality brand for electric cars, ahead of Tesla, report shows
On the technical side, NIO's pace of development on autopilot has been met with some skepticism, with investors believing it is falling behind local competitors such as Xpeng (NYSE: XPEV).
For example, the Xpeng XPILOT 3.0 automated driving assistance system was launched in April this year and was well received by the market, while NIO's Navigation on Pilot arrived five months late.
Deutsche Bank expects NIO's new model, the EE7, to be officially unveiled at NIO Day this December and to go into mass production late next year.
This EE7 is a sedan, uses 5G connectivity technology and is said to be capable of L4-level autonomy, which will ease investor concerns about NIO's technology development roadmap.
Since Q4 2018, NIO's R&D department has cut more than 30% of its workforce. In response, Deutsche Bank analysts believe that to offset the impact of layoffs on R&D, NIO is accelerating the hiring of employees, especially autopilot developers, to ensure a smooth rollout of EE7 and faster technology development than its competitors.
NIO has entered into a strategic partnership with Mobileye, an Intel-owned automated driving technology company, and this partnership will allow NIO to quickly catch up with the technology gap.
Currently, NIO is in short supply and deliveries depend on the capacity of the JAC plant.
NIO CEO William Li Bin mentioned during an earnings call in the second quarter of this year that the JAC plant's full supply chain capacity will be ready by the end of August, early September, and that NIO's monthly production will jump from less than 4,000 units to 4,500-5,000 units.
Based on this, Deutsche Bank analysts estimate that NIO deliveries will reach 11,500 and 14,000 units in the third and fourth quarters, respectively. Meanwhile, deliveries of the NIO's new EC6 SUV began in late September.
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Together, analysts at Deutsche Bank expect the NIO to deliver record deliveries and profits in the third and fourth quarters.
In addition, two developments at the NIO in September reinforced Deutsche Bank analysts' positive view of the NIO.
NIO is recruiting "charging partners" nationwide to deploy a total of 30,000 destination DC charging stations. NIO will provide construction and operation subsidies of RMB 1,000 yuan per pile per year for three years to all "Partners" who are willing to share fast-charging resources and waive service fees for NIO users.
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In addition, NIO redeemed 8.6% of NIO China's government shares for 512 million RMB, and will assume a cash injection obligation of 2 billion RMB to NIO China upon completion of the redemption.
The move was interpreted as a solution to NIO's troubling financial problems.
On August 31, NIO announced it would issue 88.5 million American depositary shares (ADSs), raising an estimated $1.7 billion, making it the largest issuance in China's high-end smart electric car industry.
NIO said at the time that the amount raised would mainly be used to increase its stake in NIO China, exercise NIO China's share repurchase rights, research and development of automated driving technology and global market expansion.
Deutsche Bank analysts believe that the emergence of a new car-making force in China, backed by powerful technology giants and ambitious local governments, is trying to disrupt the auto industry.
Deutsche Bank expects NIO, Xpeng, Li Auto (NASDAQ: LI) and WM Motor to become the "top four" new carmakers in China, competing with Tesla in the long run.
Among them, NIO's stronger brand recognition, higher sales volume, focus on the high-end SUV segment and proven operational experience make it the leader.
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