Citi Optimistic on Nio’s Prospects Amid New Model Launches and Cost Improvements

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Citi’s Positive Outlook on Nio’s Growth

Investing.com reports that Citi has placed Nio (NYSE:NIO) on a 30-day positive catalyst watch. This decision stems from expectations of faster-than-anticipated launches of new models, the rollout of an advanced driver assistance system, chip upgrades, and improved cost dynamics. The Wall Street bank anticipates that the Chinese electric vehicle (EV) manufacturer is strategically positioned for a significant sequential increase in vehicle shipments and margin enhancements in the upcoming quarters.

Citi analysts project that Nio might deliver approximately 63,000 vehicles in the second quarter—marking a 50% rise from the previous quarter. Deliveries are expected to accelerate further, reaching 100,000-120,000 units in the third quarter and potentially 120,000-150,000 units in the fourth quarter. Consequently, this may lead to a reassessment of the 2026 full-year volumes from Citi’s existing estimate of 456,000 units to a more optimistic 600,000 units.

Expansion and Innovation in Nio’s Production

Nio is set to ramp up production with ten new models slated for 2025. The inventory of older models is anticipated to be cleared by mid-May, paving the way for the introduction of four new vehicles under the 5-series and 6-series. According to the analysts led by Jeff Chung, the production costs for the new series are expected to be optimized by increasing the commonality of car parts and simplifying platform architecture.

Moreover, the company plans additional launches, including the third-generation ES8 and new models under the Onvo and Firefly sub-brands. A central theme in Citi’s thesis is cost reduction. By the end of May, Nio is scheduled to introduce its self-developed Advanced Driving Assistance Systems (ADAS) chip, which will replace Nvidia’s chip. This shift has the potential to lower material costs by approximately 10,000 yuan per vehicle.

Financial Projections and Ratings

Vehicle gross margins, expected to dip in the first quarter, are projected to recover to 13% in the second quarter and reach 18-20% for the Nio brand by the fourth quarter. Citi has maintained its Buy rating on Nio’s US shares, keeping its target price steady at $8.10, along with 62.50 Hong Kong dollars for the Hong Kong listing.

The bank anticipates that Nio will continue unveiling new models through fiscal 2026. During this period, research and development (R&D) and selling, general, and administrative (SG&A) costs are expected to decrease as a percentage of revenue, contributing positively to the company’s financial health.