Nio ADR has dropped by approximately 36% year-to-date after being downgraded by an investment bank by 40% on its target price.

Lack of new car models and intense market competition have led to a downgrade of NIO-SW by JPMorgan Chase.

In pre-market trading on Monday, NIO-SW rose by about 1% to $5.46, following a significant drop of over 7% in the previous trading day. So far this year, NIO-SW has accumulated a decline of about 36%.

On the news front, NIO-SW was recently downgraded by JPMorgan Chase with a lower target price. JPMorgan Chase advised investors to sell NIO-SW, citing a lack of new car models which could hinder sales amidst competitors launching new models.

JPMorgan Chase analyst Nick YC Lai downgraded the US stock rating of NIO-SW from "Neutral" to "Underweight" and lowered the target stock price from $8.50 to $5, a 41% decrease. This new target price is the lowest since June 2, 2020, with a further 7.5% downside from Friday's closing price.

At the same time, Lai revised down the revenue forecast for NIO-SW in 2024 to 73 billion RMB, below the general expectation of 78.9 billion RMB. He also raised the loss per share forecast for NIO-SW from 7.69 RMB to 8.38 RMB, higher than the general expectation of 6.41 RMB.

Lai mentioned that considering the significant decline of the stock, his downgrade was "a step late." He attributed the recent drop to slowed sales in January and investor concerns about sales and profits in 2024. Lai pointed out two major concerns about NIO-SW:

Firstly, NIO-SW only has one new mass-market car model this year, named "Alps," which may not be launched until the fourth quarter.

Secondly, with the lack of new car models, market competition will intensify as competitors like XPeng and BYD are expected to launch new models, and Xiaomi entering the electric vehicle market will become another major competitor.

It is worth noting that the short selling ratio of NIO-SW remains high, with the company's short selling ratio increasing from 27.19% on Monday to 35.69% on Friday according to last week's data.

The anxiety in the new energy vehicle market is growing stronger, as competition intensifies, leading major car companies to engage in price wars.

In January alone, over 16 car companies including Tesla, Li Auto, ZEEKR, Leapmotor, IM Motors, and XPeng have lowered prices for certain models or introduced limited-time cash discounts to boost sales and market share.

A previous article pointed out that amidst the competition between joint ventures and independent brands, as well as between traditional and electric vehicle brands, it is foreseeable that the price war in the car market in 2024 will continue to escalate, reshaping the industry landscape. As Secretary-General Cui Dongshu of the China Passenger Car Association said, this year is a crucial year for new energy vehicle companies to establish themselves, and competition is bound to be fierce. Scale determines costs and the survival status of companies, with most manufacturers prioritizing market share and engaging in unavoidable price wars.