Shares of Nio (NYSE:NIO) are off to a rocky start, down more than 20% year-to-date. However, the Chinese electric vehicle (EV) maker recently announced an exciting development that could increase its annual production by 60,000 vehicles per year. Nio reported that it would be developing a sub-brand model that would be positioned below its existing SUV and sedan models. So, what does this mean for NIO stock?
Nio did not immediately disclose the name and specifications of the sub-brand model. Regardless, Nio President Qin Lihong announced last year that “Gemini” would be the code name for an upcoming 2022 product launch. Additionally, Nio’s CEO, William Li, confirmed in a conference call last year that Nio would be launching a sub-brand. Li added that Nio had already established a team to work under the sub-brand. Furthermore, he claimed it would cater toward the mass market.
What else should you know about Nio’s new sub-brand model? Let’s dive right in.
NIO Stock: 7 Things to Know About Nio’s Sub-Brand
- Nio delivered a total of 91,429 vehicles in 2021, representing an impressive year-over-year (YOY) increase of 109%.
- In the fourth quarter of 2021, Nio delivered a record 25,034 vehicles, which was up 44% YOY.
- Li stated that the relationship between Nio and the upcoming sub-brand would be similar to the relationship between Toyota (NYSE:TM) and Lexus. Additionally, Li explained that the price of the new model would be lower in price than a Tesla (NASDAQ:TSLA), but higher in quality.
- Barclays analyst Jiong Shao believes that a mass market sub-brand for Nio is the right move. The analyst believes that catering to the mass market will allow Nio to increase sales and collect more data. With more data, Nio can improve its autonomous driving system.
- Furthermore, Shao has a Nio price target of $34 per share. Shao’s price target is based off of a 25x multiple of expected fiscal year 2023 earnings before interest, taxes, deductions and amortization (EBITDA) of $2.2 billion.
- In addition, Shao believes that Nio’s “unit delivery growth is set to re-accelerate later this year.” Nio’s second factory is slated to begin production in Q3 of this year.
- With the launch of the sub-brand and the Nio’s ET5 model, investors have high hopes for NIO stock. The ET5 is expected to begin deliveries this September.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
