Chinese electric vehicle manufacturer Nio (NYSE:NIO) sent a shot across the bow, a seeming message directed at sector leader Tesla (NASDAQ:TSLA). On May 15, Nio will launch a low-priced SUV designed to compete directly against the popular Tesla Model Y. Subsequently, NIO stock swung higher as the global war of attrition heated up.
According to Cnevpost, Nio will launch a sub-brand called Onvo (or Ledao) in China. The debut coincides with the International Day of Families, which appropriately ties in with Onvo’s messaging. Standing for “On Voyage,” the literal translation of its Chinese name is “Path to Happiness.” Nio stated that it envisions Onvo creating “happiness on every path we travel with family.”
From a financial perspective, Onvo’s standout attribute is that its bill of materials (BOM) cost will come in approximately 10% lower than the Model Y. Notably, the company is targeting the family-centric EV segment, which implies a price tag of RMB 250,000 or $34,600.
For context, the Model Y represents one of the best-selling SUVs in China and sells for RMB 249,900.
EV Price War Heats Up as NIO Stock Initiates a Recovery
As with other EV players, NIO stock has not had an auspicious start to 2024. Since the beginning of the year, shares have tumbled 37%. At the same time, they’re engaging in a recovery, moving up almost 13% in the trailing month.
Of course, what contributed to the volatility was Tesla’s price war. In an attempt to rattle the competition and drive up its own sales, Tesla began slashing prices for its lineup. Naturally, this matter forced rivals to respond. Nio will now be targeting a crown jewel of the EV market, thereby exciting stakeholders of NIO stock.
Per CNBC, the Chinese EV maker didn’t state whether or not it will release Onvo outside China. However, the aforementioned price war set in motion similar actions. For example, China’s XPeng (NYSE:XPEV) will launch a sub-brand called Mona in the next two or three months.
NIO stock and XPEV are both up on Thursday afternoon trading. On the other hand, TSLA slipped about 1%.
Why It Matters
Generally, analysts are bullish on NIO stock, rating shares a consensus moderate buy. However, the most recent three expert assessments have not been particularly encouraging, breaking down as two holds and one sell. Nevertheless, the overall price target stands at $6.92, implying over 30% upside potential. The most optimistic target (within the past three months) calls for $10.40, a near doubling of the current price.
On the date of publication, Josh Enomoto did not have (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.
