Bernstein Out Bearish On EV Startup NIO

NIO Inc NIO notched a 10-percent pop in value shortly after its Wednesday debut on the U.S. markets. It continued to rise 2 percent ahead of the next trading session.

In just a few hours, the Chinese electric vehicle company raised $1 billion, but the Baidu Inc (ADR) BIDU and Tencent-backed automaker wasn’t able to win all bulls.

“We’re skeptical NIO can achieve its volume targets,” Bernstein analyst Robin Zhu said Thursday in a note initiating coverage with an Underperform rating.

“There appears to be evidence (both from NIO’s F-1 and anecdotally via industry contacts) pointing to a reservations number that’s fallen over time. Longer-term, we question whether the premium EV segment will be big enough to support NIO’s volume ambitions.”

NIO targets 100,000 unit sales by 2020 and 300,000 by 2025, which suggests a double-digit share of a premium EV market already resting on bullish adoption forecasts.

As the firm only began delivering orders in June, Axiom said NIO makes Tesla Inc. TSLA and “Elon Musk's manufacturing output look prodigious.” Bernstein projects 50,000 unit sales by 2020 and 160,000 by 2025.

“NIO is the first of China’s EV start-ups to go public and will immediately become the most interesting company we cover,” Zhu said. “Many things intrigue us about NIO — from its impressive branding, to the ES8, to its massive volume ambitions, to its prodigious cash burn. But we’re unconvinced NIO’s shares represent a sound investment.”

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Photo by Jengtingchen/Wikimedia.