Nio could be the 'next iconic auto brand,' says Deutsche Bank

Published Tue, Sep 29 20208:07 AM EDTUpdated Tue, Sep 29 20204:06 PM EDT

(This story is for CNBC PRO subscribers only.) Nio is emerging as a leader among China-based electric vehicle companies, and Deutsche Bank believes the company is just getting started. The firm reiterated its buy rating and $24 target on the stock — a 27% upside from current levels — on Tuesday in a note titled "becoming the next iconic auto brand?" Since initiating coverage on the stock on Sept. 8, Deutsche Bank said it's received some pushback from investors regarding its bullish stance given that Nio doesn't have the same star power as competitors like Tesla . But the firm said that while there's some truth to that given that the company is relatively young, studies point to brand loyalty. "We continue to see compelling evidence that NIO is increasingly perceived by customers as a high-quality premium brand with best-in-class technology and service," analysts led by Edison Yu said in a note to clients. Yu noted Nio's 62% referral rate, and pointed to a study that found Nio's favorability among customers is as high as BMW and Mercedes Benz. In a different report, Nio surpassed Tesla to rate as the most reliable battery electric vehicle. "As BEV adoption increases and word of mouth spreads, we believe Nio can take material share in the premium segment as consumers begin to understand the value proposition and quality of its products and services," Yu said. Nio's U.S.-listed shares have surged 368% this year through Monday's close amid broad investor enthusiasm for the electric vehicle space. The company reported a record 3,965 vehicle deliveries in August, representing a 104% year-over-year increase. So far this year the company has delivered 21,667 vehicles through the end of August, for a year-over-year jump of 109.9%. Deutsche Bank said it's expecting record deliveries in both the third and fourth quarters, boosted by Nio's newly launched EC6 SUV coupe. Yu believes that four Chinese automakers, backed by large, well-capitalized tech companies as well as ambitious local governments, are poised to disrupt the auto industry. He calls them the "fab four" — Nio, Xpeng, Li Auto and WM Motor — and sees Nio as the "leader of the pack given its stronger brand perception, higher sales volume, focus on the premium SUV segment, and battle-tested operational track record." That said, he doesn't see it as a zero sum game. Rather, Yu believes customer demand can support all four and Tesla since there is "still plenty of runway to capture market share from traditional ICE automakers." Shares of Nio gained 10.85% on Tuesday. - CNBC's Michael Bloom contributed reporting. Don't miss CNBC and Institutional Investor's Delivering Alpha conference on September 30 , featuring Treasury Secretary Steven Mnuchin, Senator Elizabeth Warren, Alibaba's Joseph Tsai, Vista Equity Partners' Robert Smith, J.P. Morgan's Mary Callahan Erdoes, Inclusive Capital's Jeff Ubben and more.

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(This story is for CNBC PRO subscribers only.)

Nio is emerging as a leader among China-based electric vehicle companies, and Deutsche Bank believes the company is just getting started.

The firm reiterated its buy rating and $24 target on the stock — a 27% upside from current levels — on Tuesday in a note titled "becoming the next iconic auto brand?"