The Chinese EV manufacturer NIO (NYSE:NIO) has gained serious popularity on Wallstreet after debuting on the NYSE in late 2018. NIO’s success in delivering over 125,000 EV’s to date has driven the share price up 223.92% over the past year. The EV innovator has also captured the attention of Wallstreet’s largest investment firms. Across the board of Wallstreet analysts, NIO maintains an average Buy rating. In particular, Morgan Stanley analyst Tim Hsiao set a street high target of $80 earlier this year -suggesting an upside of 77%. With investor interest at a peak, this article will explore the NIO stock forecast over the next 5 years.
EV demand in China to grow to 7.84 Million vehicles by 2025
One bullish aspect of NIO stock, is the companies strong delivery growth in China. In the first quarter of 2021, NIO delivered a record 21,896 vehicles representing a 111% YOY growth. Interestingly, NIO captured a 23% share of China’s All-Electric SUV Market in April. NIO’s market share was 6% higher than Tesla’s market share, which currently sits at 17%. In addition, NIO has seen a recent spike in demand for the ES8 model. In July, sales for the ES8 spiked by 13.8% month-on-month (MoM).
For the remainder of 2021, Citi analyst Jeff Chung expects NIO to deliver 93,000 vehicles. Furthermore, Chung estimates new energy vehicles sales in China to grow to 7.84 Million units. Chung believes this mega-trend in China will accelerate NIO vehicle deliveries over the next 5 years. According to a Barrons report, analysts’ estimate that NIO is expected to sell close to 345,000 vehicles in the year 2025.
NIO targets 4,000 Battery Swap Stations by 2025
A battery swap station allows the user to quickly swap out their car battery for a fresh one rather than waiting for it to re-charge. Range anxiety, is a challenge EV manufacturers are currently facing. This is due to a deficit in charging stations across the globe.
NIO has currently built 300 battery swap stations in China and is looking to add an additional 3,700 stations. Of the 4,000 stations, NIO aims to build 1,000 outside China by 2025, extending NIO’s reach across the globe.
NIO’s battery as a service or BAAS provides flexibility to the emerging EV market, allowing customers to purchase NIO vehicles at a lower price while leasing the battery. This allows for battery swaps with more efficient future battery models.
Morgan Stanley analyst Tim Hsiao noted that the BAAS will reduce the cost for the end-user “will see NIO’s incremental vehicle sales increase by 10-36% between 2021-2030”.
Revenue outlook for NIO stock
Firstly, across the board of analysts the average revenue forecast for 2021 expects the company to generate $5.41 Billion. This represents revenue growth of 112% year on year (YOY) from 2020. Furthermore, analysts expect the company to generate $8.91 Billion in 2022. The catalysts for this forecasted revenue growth include NIO’s new ET7 model which is expected to steal market share from Tesla’s Y model. The ET7 is expected to begin deliveries in the first quarter of 2022.
NIO is expected to deliver 70,000 ET7 units in 2022. This will bring the company’s total deliveries to 170,000 units for the year according to China International Capital Corporation (CICC), China’s largest investment bank.
In addition, the fast growing demand for EV’s in China is also attributing to a positive revenue outlook. Research conducted by Canalys suggests that 1.9 million Electric Vehicles will be sold in China in 2021 alone, a year on year growth of 51%. If we combine this with tumbling Tesla sales in China, we can conclude NIO has an opportunity to capture serious Chinese marketshare in 2021/22.
How is NIO combatting the semiconductor crisis risk to deliveries?
The global semiconductor shortage saw NIO’s Hefei factory close for a period of 5 working days in the first quarter of 2021. However, since its initial impacts Chinese EV companies have maintained strong delivery growth in recent months. However, further supply constraints will continue to squeeze the automotive industry. Nio has taken action in recent months by securing renewal of manufacturing contracts.
“While the global supply chain still faces uncertainties, we have been working closely with our partners to improve the overall supply chain production capacity.”said William Bin Li, founder, chairman and chief executive officer of NIO in Q2 earnings.
What’s in the pipeline for NIO stock moving forward?
In previous articles, we have discussed the launch of NIO’s Battery-as-a-service (BAAS). This development has enabled for lower initial purchase prices of vehicles, enhanced battery performance and a better user experience. Morgan Stanley analyst Tim Hsiao argues, reducing the cost for the end-user “will see NIO’s incremental vehicle sales increase by 10-36% between 2021-2030”. Hsiao further noted that if NIO can ensure they are the BaaS leaders, then the company could set the industry standards. Ultimately bolstering NIO’s brand and market share in 2021, and beyond.
The Bottom Line – NIO stock forecast 2025
Overall, the bullish revenue forecasts and bolstering Chinese EV market is highlighting positive signs for long term investors. Furthermore, NIO is showing no signs of slowing on their delivery front with the ET7 expected to dominate the market in 2022 based on analyst forecasts.
However, the current shortage of semi-conductors and an increasing competition in China will continue to impact NIO stock. Therefore, it is essential for NIO to capitalise on Chinese market share by meeting the high demand for EV’s and beating its domestic competitors Li Auto and Xpeng.
Written by Tyger Fitzpatrick
The information above is presented as factual information and is not financial advice nor does it constitute a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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