Deutsche Bank Maintains Optimistic Outlook on Nio

By Michael Elkins

Deutsche Bank has maintained a Buy rating and a price target of $21.00 on Nio following the company’s recent guidance revision. Nio has faced several challenges over the past few quarters, including issues with metal casting parts, EDS assembly, silicon carbide supply, and most recently, delivery logistics. However, analysts at Deutsche Bank believe that these operational difficulties surrounding the Chinese automaker will eventually be resolved, especially given the positive performance of competitors like Li Auto and Xpeng, which have either met or exceeded their estimates, and Zeekr, which surpassed its overall target for 2022.

Nio’s recent struggles resulted in fourth-quarter deliveries of only 40,000 vehicles, falling short of their initial guidance of 43,000 to 48,000. December’s deliveries were also disappointing, with only 15.8K units delivered compared to an expected ~20K. Deutsche Bank sees this as a reflection of concerns regarding management’s execution capabilities, particularly as the company seeks to launch two additional automotive brands and significantly expand into the European market.

In a note, Deutsche Bank analysts stated, “We sense that the company has been overly ambitious in implementing new manufacturing technologies and has not prioritized supply chain risk management adequately. It remains unclear whether these challenges stem from structural issues or personnel problems (or a combination of both), but we believe the management team is now acutely aware of these shortcomings and should demonstrate improved execution in 2023.”

The analysts anticipate that all existing operational bottlenecks will be resolved by the end of the first quarter.

Nio’s shares rose by 3.08% in premarket trading on Tuesday.