It's another week in auto, and Bank of America analysts are keeping an eye on Tesla (TSLA) and General Motors' (GM) future events. UBS analysts keep their bearish position ahead of the Tesla Robotaxi event, and Deutsche and JP Morgan analysts have a compelling view of a key Tesla rival in China.
Nio's Onvo is on the way
Unlike other Chinese EV automakers like BYD or Li Auto, Nio (NIO) is not profitable.
During its second quarter 2024 earnings on September 5, Nio recorded stronger margins and record sales but also reported a net loss of an equivalent of $721.2 million.
In his note more than two weeks ago, JP Morgan analyst Nick Lai upgraded Nio's stock rating from Neutral to Overweight and raised its price target from $5.30 to $8 per share, noting that “a sharp decline in cash burn and better operating cash flow” was to come in the remainder of the year.
Related: Analysts weigh in on Chinese EVs, make predictions on Tesla's Robotaxi event
Much of that cash flow is expected to come from its line of more mainstream electric crossover SUVs and sedans, but also from a new sub-brand called Onvo.
Launched in March 2024, Onvo is set up to be a more mass-market brand than Nio; much like Old Navy and the Gap or GU and Uniqlo.
On September 20, Onvo unveiled its first model: the L60 crossover SUV, a worthy Chinese competitor to Tesla's bestselling Model Y.
On looks alone, the Tesla and the Onvo offer very similar aesthetic amenities. The inside offers a clean, Model Y-like interior, highlighted by a giant 17.3-inch infotainment screen, while the outside offers a sleek, coupe-like design.
However, the comparisons stop at the price. For the equivalent of $21,200, plus an $85 to $125 monthly battery rental fee, drivers can get enjoy an electric range of 341 miles or 454 miles on the larger pack. Better yet, under Nio's clever battery rental program, smaller batteries can be swapped out temporarily for a longer-range one.
Even if buyers decide to purchase a battery outright, an L60 with 341 miles of range on a 60kWh battery or an L60 with 454 miles on an 85kWh battery wildly undercuts similar offerings from Tesla. The L60 with the standard battery goes for the equivalent of $29,300 and $33,400 for the bigger 85kWh battery—wildly undercutting the $34,600 base price of the bog-standard Tesla Model Y RWD.
In a note published on September 19, Deutsche Bank analyst Wang Bin said that he believes that "the Onvo L60 SUV's success paves the way for a Nio brand revival,” emphasizing that the new car will be crucial to its success.
In a separate note, a JP Morgan analyst not only emphasized the new SUV's lower price compared to the Model Y but also said that he expects monthly sales of the L60 to reach "around 30-40% of Model Y's," which, when it does come true, "would be a strong fundamental driver for Nio’s financial and operational performance.”
JP Morgan reiterated its Overweight rating for Nio and $8 price target on US shares.
To Tesla Robotaxi or not to Tesla Robotaxi
Analysts still have lots of questions about the Tesla Robotaxi ahead of the October 10 event at the Warner Brothers lot in Burbank, California.
Nonetheless, some analysts are keeping a slightly bearish, realistic point-of-view ahead of the event. In a note published on September 19 UBS analysts Joseph Spak and Patrick Hummel said that their analysis shows that the prospect of a Tesla robotaxi "may still have a ways to go" due to regulatory issues.
For instance, the Tesla robotaxi is expected not to come with a steering wheel. If Tesla were to release any car without a steering wheel, Musk & Co. would need to acquire a Federal Motor Vehicle Safety Standards exception before it hits the streets, which could drag on for years.
"We believe [wide-scale] Tesla robotaxi deployment is unlikely within the coming years," Spak and Hummel wrote. "That is not to say Tesla isn't making technological progress, but Tesla needs to show that the tech is ready and safe, deal with a myriad of local regulations, and [potentially] figure out logistics and operations of a transportation network company."
Additionally, the duo does not believe that an "affordable," $25,000 Tesla is in the books.
"We haven't heard of any reports of taking down existing lines, which we believe may be necessary to launch the new vehicle," the analysts said.
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Alternatively, Bank of America analyst John Murphy remains fairly positive about the event. He believes that Tesla's unpredictability could be a positive catalyst for the stock price.
"Tesla will likely put on a good show, providing an unpredictable intangible ahead of the event. We expect any additional detail would skew more positively for the stock given past experience," Spak said.
"While we can't predict exactly what this might entail, TSLA could provide an estimate for how quickly it can scale, the size of the robotaxi market it is targeting, targets for achieving unsupervised FSD, potential for incremental AI-driven revenue, other applications of robotic tech, leveraging of lifetime revenue streams from connected cars & consumers, among other possibilities. The Show will likely be an important component of the event."
UBS maintained a Sell rating and a $197 price target on Tesla shares, while Bank of America maintained a Buy rating and a $255 price target.
Related: Ford CEO's haunting visit to China triggered its radical EV shift
Motors Generally Bullish
Ahead of General Motors' Investor Day in Spring Hill, TN, on Oct. 8, Bank of American analyst John Murphy wrote in a note on September 20 that General Motors is looking to show that it is headed in the right direction within the evolving automotive industry.
He sees that while part of General Motors' diversified revenue potential is in software like its software platform Ultifi, OnStar and SuperCruise, much of his optimism is parked in GM's other core businesses. He expects GM to unveil much more of its EV strategy, albeit "with a greater emphasis on hybrid technology."
Additionally, Murphy expects to hear about GM's plans to revitalize its Cruise robotaxi service, which will utilize its Chevrolet Bolt EVs instead of an advanced vehicle without a steering wheel or pedals. He expects GM to "take a measured approach to [Cruise's] expansion," noting that any meaningful revenue is still years down the line.
"Longer-term, we think robotaxi services run by automakers such as GM are inherently advantaged as they could scale more quickly and have more control of the entire experience from car design to car features to driving performance, among other advantages," Murphy wrote.
Bank of America maintained a Buy rating and a $85 price target on GM shares.
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