Nio's BaaS Distinguishes It From Tesla — CLSA Initiates Coverage With $50 Target

Nio Inc’s NIO recent foray into the electric sedan market, its upcoming plans to sell in Europe, and its unique battery-charging service model positions it differently from other premium electric vehicle makers, according to brokerage CLSA.

The Nio Analyst: CLSA analyst Soobin Park has initiated coverage for the Chinese electric carmaker with Buy rating and a 12-month price target of $50.

The Nio Thesis: Park expects Nio’s brand value, game-changing battery-swap model, and growing battery services revenue to drive its top-line sales growth and become profitable in 2023.

The analyst sees semiconductor chip shortage or tech developments as near-term hiccups and that Nio's electric vehicle sales volumes and supply-chain partnerships as potential upside catalysts.

CLSA expects Nio to be able to maintain a premium image as it expands into the sedan category and cracks the European EV market starting mid-2021.

See Also: How to Buy Nio (NIO) Stock

Park notes Nio’s battery-as-a-service (BaaS) subscription model as one of the big differentiators for the EV maker. BaaS, it says, will also bring down the upfront cost of its EVs, enable faster charging, and address the issue of insufficient charging stations.

The analyst sees Nio’s strategy to invest in future technology development from solid-state batteries to autonomous driving systems, a huge plus and another differentiation factor from the likes of Tesla Inc TSLA and BYD Co BYDDY.

The electric carmaker is planning to roll out ET7, a mid-sized sedan, in 2Q22 for which it is currently developing a semi-solid 150kWh battery and an autonomous driving system.

Why It Matters: Nio is looking to expand its product lineup as it eyes a greater share of the electric vehicle market. In January, it unveiled ET7, its fourth mass-produced electric vehicle model just around when rival Tesla started selling its China-made Model Y sport-utility vehicle in the Chinese market.  

Shares of Nio, which are down about 16% so far this year, makes a good case for a better entry point after rising interest rates and brought about a broad sell-off in high-growth stocks, according to CLSA.

Price Action: Nio shares closed 3.76% higher at $41.08 on Friday and were up 0.85% in extended hours.

Read Next: Nio ET7 Among Two Best Cars On Display At Shanghai Auto Show, Says Rival Li Auto's CEO

Photo: Courtesy of Nio