After a relatively uneventful 2021, NIO will see a product-rich year, and Edison Yu's team laid out what they see as the catalyst path for NIO stock in 2022 in their latest note.
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NIO doesn't have any new products on the market in 2021, which overlaid with policy risk has left it with weak stock performance.
Going into 2022, NIO will deliver three models based on the latest NT 2.0 platform, and its semi-solid-state battery may become available, promising to make this year its most product-rich one.
In a research note sent to investors on Tuesday, Deutsche Bank analyst Edison Yu's team said they expect NIO's marquee product development efforts to become a reality in 2022, which should help the stock recover.
The team laid out what they see as the catalyst path in 2022:
ET7 (flagship large sedan) deliveries begin on 3/28
Unveil new 6th model ("ES7" SUV) in late 2Q or early 3Q
New NAD features roll out starting mid-year
ET5 (mid-size sedan) deliveries begin in September
ET7 available in Germany in September
ES7 SUV deliveries begin in 4Q
Hybrid solid state battery available in 4Q
Mass market brand update before year-end
In addition, the team believes that NIO will likely complete its primary listing in Hong Kong by the summer and be included in the Shanghai-Hong Kong Stock Connect by the end of the year, alleviating concerns about delisting in the US.
The team reiterated its Buy rating on NIO and its $70 12-month price target.
NIO closed Monday up 5.65 percent to $33.47, the price target implies a 109 percent upside.
NIO unveiled its flagship sedan ET7 at NIO Day 2020 on January 9, 2021, and said at the NIO Day 2021 event on December 18 that the model will begin locking in orders on January 20 and deliveries will begin on March 28.
Yu's team believes the car should sell well, with orders likely already up to 50-60k.
"We forecast 30k deliveries in 2022, limited by supply chain, then doubling to 60k in 2023. For context, BMW 5-series, Audi A6L, and MB E-class all sell well above 100k units per year in China," the team said.
In announcing its second-quarter earnings on August 12, 2021, NIO said it aims to deliver three products based on the NIO Technology Platform 2.0 in 2022, including its flagship sedan, the ET7.
The ET7 is the platform's first model, with the ET5 sedan being the second. While the third model remains a mystery, recent rumors suggest it will be the new SUV ES7.
Yu's team expects that the ES7 could be priced higher than the RMB 358,000 starting price of NIO's current top-selling SUV, the ES6, and potentially around RMB 400,000.
The team expects that the official unveil event for the NIO ES7 will likely take place in late second quarter or early third quarter, with deliveries likely to begin in the fourth quarter, shortly after the ET5.
Regarding this expectation, the team explained that:
The reason for this delay is to avoid causing a drop-off in existing SUV model sales, mainly the ES6, but we feel this is strategically the right move considering how competitive the mid-size SUV segment is becoming and eventually see this as a tailwind for 2023 volume estimates.
To mitigate cannibalization of existing sales, we expect NIO to conduct a hardware upgrade for existing vehicles (infotainment) and also increase incentives such as subsidizing the interest payments and/or discounting NIO PILOT.
For the ET5, Yu's team believes it will materially broaden the reach of NIO vehicles, targeting a lower price point and showcasing a sporty design.
The team expects that deliveries of the NIO ET5 could be just around 9,000 units in 2022, with that number expected to rise to 65,000 units in 2023 as production capacity ramps up.
William Li, founder, chairman and CEO of NIO, unveiled the company's plans for global expansion at the NIO Day 2021 event, saying NIO will enter Germany, the Netherlands, Sweden and Denmark in 2022.
The company has already entered Norway, NIO's first stop in overseas markets, and opened its first overseas NIO House in Oslo in October.
Yu's team mentioned that traffic at the NIO House appears to be robust judging from social media videos, and that NIO's fairly slow delivery in Norway may be due to the company's desire to de-report service and charging infrastructure to maintain a seamless high-end user experience.
On the development schedule for NAD (NIO Autonomous Driving) software, Yu's team noted that NIO plans to launch an enhanced version of its Navigate-on-Pilot "Plus" feature mid-year, which may provide some borderline highway pilot capability.
In late 2022 and early 2023, the company will likely OTA more advanced features, such as city pilot, the team said.
In a conference call following the August 12 announcement of second-quarter earnings, NIO confirmed that it will enter the mass market with a new brand, that preparations have been accelerated and that a core team has been established.
Yu's team believes there will be some new updates about the new brand before the end of the year and expects it to target the RMB 150,000-250,000 market.