Could the ET5 Sedan Take NIO Stock Higher?

NIO is underperforming EV stocks in 2021. What's the 2022 forecast for NIO, and can the ET5 sedan take the stock higher?

Mohit Oberoi, CFA - Author

Dec. 13 2021, Published 11:59 a.m. ET

NIO car on display
Source: NIO Twitter

With a year-to-date loss of almost 30 percent, NIO is underperforming EV (electric vehicle) peers. Most EV stocks have recovered from their 2021 lows, and Tesla’s market cap has soared above $1 trillion. What’s the 2022 forecast for NIO, and could the rumored launch of the ET5 sedan take the stock higher?

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This year, NIO's Chinese EV peers Li Auto and Xpeng Motors are up 12.6 and 9.3 percent, respectively, and newly listed EV stocks Rivian and Lucid Motors are attracting premium valuations. The chip shortage has taken a toll on NIO’s deliveries and stock price.

NIO Day could drive the stock higher

At NIO Day, set for Dec. 18, the company is expected to make several announcements that could take its stock higher. EV companies use these events to provide updates about new models and production plans. At its own Power Day this year, Volkswagen talked about its vehicle electrification and battery plans.

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nio day  expectations
Source: NIO Twitter

Rumors suggest NIO will launch the ET5 sedan at the event

Up until recently, NIO has built its brand to focus on premium EVs. Similarly, Elon Musk's Tesla started with premium EV models, but the lower-priced Model 3 and Model Y now account for the bulk of its deliveries.

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At NIO Day, NIO is expected to unveil the ET5, a budget electric sedan. The model is set to compete with Tesla’s Model 3, the company's first mass-market model. NIO's announcements could help its stock catch up to peers.

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2022 could bring some upward momentum for NIO

NIO stock's 2022 forecast looks positive. As there's a massive valuation disconnect between NIO and Tesla, NIO’s valuation could be due to expand.

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However, whereas China's tech crackdown isn't aimed at its EV companies, the action could take more of a toll on investor sentiment. Furthermore, the VIE (variable interest entity) structure under which NIO trades on U.S. markets has been under scrutiny. In its SEC filing, NIO warned of a possible delisting if the VIE structure were made illegal.

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NIO could go for a Hong Kong listing

As fellow Chinese EV company Xpeng pursued a secondary listing in Hong Kong within a year of its U.S. listing, it had to get a dual primary listing. The process and maintaining compliance afterward can be tedious. The company explained the action was to mitigate tensions between the world’s two biggest economies. Likewise, Alibaba went for a secondary listing in Hong Kong.

NIO is also eligible for a secondary listing in China, and it could be just a matter of time before the company proceeds with one. A secondary listing in Hong Kong could help offset delisting fears for NIO. For now, watch for any major announcements that could take the stock higher.


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