Shares of Chinese EV maker NIO (NYSE: NIO) surged 22.57% on Wednesday and then rose another 5.92% to a record high of $28 per share on Thursday.

NIO's market capitalization has now reached $37.86 billion (RMB 253.5 billion), surpassing SAIC (600104.SH)'s RMB 239.5 billion and trailing only BYD (002579.SZ)'s RMB 356 billion, making it the second-largest vehicle-listed company in China by market capitalization, equivalent to the market capitalization of two Guangzhou Automobile Group (601238. SH) by market capitalization.

It's worth mentioning that NIO had its "life on the line". In March this year, NIO in the 2019 annual financial report warned that "cash is insufficient to support the working capital and liquidity required to continue operations for the next 12 months”.

CNBC's Jim Cramer: I'm not going to fight you if you like NIO

As of December 31, 2019, NIO had only RMB1,056.3 million in cash and cash equivalents, restricted funds, and short-term investments on its books.

In March of this year, NIO's share price hit a new low for the year of just $2.11 per share, and analysts have been bad-mouthing the company.

In just six months, NIO's share price rose more than 10 times.

Why did NIO's stock price soar?

NIO delivered a total of 4,708 vehicles in September, up 133.2 percent year-on-year, setting a new high for a single month of deliveries.

For the first three quarters of the year, NIO has delivered 26,375 vehicles, surpassing last year's level.

This increase in deliveries will further enhance NIO's gross margin and improve performance.

NIO this week also announced the launch of NIO NOP Pilot Assist with the update of NIO OS 2.7.0.

With launch of NOP, is NIO better positioned to handle competition from Tesla?

NIO is now the second car company, apart from Tesla, to implement this feature in mass production.

Apart from the above reasons, institutional backing has been a major force driving NIO's stock price since the second quarter of this year.

During NIO's trough in 2019, institutions had issued "outperform" forecasts for the company.

But as NIO's performance improved this year, a number of institutions, including JPMorgan Chase, Citigroup and others have raised the company's target price.

Tesla's record-high stock price has also pushed capital to the new Chinese carmaker, which is currently listed in the US and has a relatively low share price.

JPMorgan raised its price target on NIO to $40 from $14, while Citi raised its price target to $33.2 from $18.1.

JP Morgan sharply raises NIO price target to $40, representing 85% upside potential

According to Nick Lai, an analyst at JPMorgan, NIO is expected to capture about 7 percent of China's EV market in the long run, and a 30 percent share of the high-end EV market.

According to the analyst, NIO's new sedan model, scheduled to be unveiled on Nio Day in December, will further boost the company's existing portfolio and sales.

Single-store sales need to be boosted

The NIO's performance in the premium segment is already putting pressure on traditional carmakers. In the first eight months of this year, the NIO ES6's cumulative sales have surpassed the Toyota Prado, second only to the Mercedes GLB.

NIO's record sales in September is partly driven by the traditional peak season in the domestic car market, and partly because NIO recently announced the cancellation of its "lifetime free battery swap”.

NIO reduces free battery swap benefits for buyers after Oct 12

The free battery swap entitlement will remain unchanged for customers who pay the deposit and take delivery of the car on or before October 11, 2020, which leads to some early consumption.

Tesla's second model, the Model Y, is expected to roll off the assembly line at the end of this year at its Shanghai factory and be delivered in the first half of next year.

The starting price of the Tesla Model Y is expected to be lowered after Chinese production, while NIO has already started deliveries of its first coupe, the EC6, which NIO defines as the beginning of a head-to-head competition with Tesla.

At the end of December, NIO will also launch a new sedan model.

At present, although NIO has become the highest monthly deliveries among new carmakers in China, its single-store sales scale is still relatively small compared to Tesla, and the efficiency of its online store operation still needs to be improved.

According to CICC, Tesla China currently has 90 stores across the country, with a monthly sales volume of 131 vehicles per store. NIO, on the other hand, has 160 stores across the country, with monthly sales of only 29 vehicles per store.

Why isn't NIO worried about Tesla's frequent price cuts in China?