Tesla, Nio and Rivian all downgraded on slowing EV demand, pricing pressures

By Tomi Kilgore

Tesla, Rivian stocks head for third-straight loss, Nio's stock bounces off four-year low

Tesla Inc. lost another bullish backer - one who said Monday that slowing demand, rising inventories and tightening liquidity should hurt the electric vehicle giant's results over the next year.

In addition to Tesla (TSLA), Mizuho analyst Vijay Rakesh, also downgraded the shares of Nio Inc. (NIO) and Rivian Automotive Inc. (RIVN), all to neutral ratings from buy.

"[E]V sales growth is decelerating and much-needed lower-cost models are now expected late 2025-2026," Rakesh wrote in a note to clients. "We believe EV [original equipment manufacturers] face a 'Catch-22,' juggling profitability and production ramps, while undergoing elevated capital risks, and the EV market in China cools."

Rakesh lowered his 2024 growth outlook for sales of battery-electric vehicles to 15%, from his previous forecast of 25% just two months ago. He said government subsidy cuts for EVs, and higher interest rates and insurance costs are keeping affordability low and hurting demand.

Tesla's stock fell as much as 1.2% soon after the open, before bouncing to be up 0.1% morning trading. The stock, which gained 4.4% last week, has still tumbled 15.3% in March.

Rakesh cut Tesla's stock price target to $195, which implies about 14% upside from Friday's close.

He said that while Tesla remains the global EV leader, with unmatched scale and profitability, "moderating growth, China competition, higher inventory" are challenges that could hurt results for the next year.

Tesla, which generated nearly 23% of its 2023 revenue from China, has been facing price cuts of 10% to up to 15% by rival China-based EV makers, including BYD Co. Ltd. (BYDDY), Li Auto Inc. (LI) and Xpeng Inc. (XPEV), Rakesh noted. That has pushed Tesla to lower prices by up to $3,000 on certain models, but also cut production, he said.

Tesla has lost no less than two bulls in March, and one analyst turned bearish. Of the 51 analysts surveyed by FactSet who cover Tesla, just 33% are now bullish, while 47% are neutral and 20% are bearish.

Meanwhile, Nio's stock rose 1.3% in morning trading Monday, to put it on track for the first gain in nine sessions. The stock had tumbled 21% over the past eight sessions, which were all losses as it closed unchanged on March 15.

Rakesh believes Nio will have trouble maintaining prices, given the price wars and the fact that its cheapest model starts at about $41,000.

He lowered his stock price target to $5.50 and cut his 2024 deliveries estimate by 20% to 183,000 vehicles, which is below the Wall Street consensus of about 204,000 vehicles.

Rivian shares slumped 1.6% in morning, after losing 4.9% over the past two sessions.

Rakesh said that while Rivian has "strong branding" and "solid" consumer and commercial sport-utility and truck EV models, the high prices of the R1 model, with prices in the $70,000 to $95,000 range, are "challenging" in the current environment.

Deliveries of the low-price R2 and R3 models are "still distant," as they are slated for the first half of 2026.

Rakesh cut his stock price target to $12, and his 2024 shipments estimate by 11% to 74,500 EVs, below the consensus of about 83,000 EVs.

-Tomi Kilgore

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03-25-24 1027ET

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