Financial Services Association, Feb. 26 (Editor: Wu Ka Wing) Affected by the agency's downgrade rating and target price, NIO - SW (09866.HK) weakened again today. As of press release, it fell 4.58% to HK$43.75.

In terms of news, NIO Auto was recently downgraded by J.P. Morgan Chase downgraded its rating and target price. According to the report, the bank's analysts downgraded NIO's US stock rating from “neutral” to “reduced holdings” and lowered the target share price from $8.50 to $5, a reduction of 41%. This adjustment reflects market concerns about NIO's sales prospects this year.

Motong's main concerns focus on NIO's lack of new models this year. According to the report, NIO is expected to have only one new model called the “Alps” for the mass market, and it may not be available until the fourth quarter. This may cause NIO's competitiveness in the market to weaken.

Meanwhile, rivals in the same industry, such as Xiaopeng Motors and BYD, are expected to launch new models to increase market competition. Furthermore, the addition of Xiaomi is seen as “another important competitor” in the mass market. These factors may have a negative impact on NIO's sales performance.

As a result, Motong lowered NIO's revenue forecast for this year to 73 billion yuan. Meanwhile, due to uncertain sales prospects, Motong also raised NIO's loss forecast per share this year from 7.69 yuan to 8.38 yuan.

Short selling data for some auto stocks is still high

What is more noteworthy is that NIO's short selling data is still high. According to last week's data, the company's short selling share rose from 27.19% on Monday to 35.69% on Friday.

The short selling data for other auto stocks was also high during the same period. For example, Great Wall Motors (02333.HK), Xiaopeng Motor-W (09868.HK), Zero Sports Auto (09863.HK), and Ideal Automobile-W (02015.HK) all accounted for more than 20%, which were 47.18%, 40.17%, 28.36%, and 26.24%, respectively.

Why is the auto stock short selling data so high?

First, BYD announced on February 19 that the Qin PLUS Honor Edition, a subsidiary of Dynasty Network, was officially launched, starting at 79,800 yuan. This price really impacted the A-class car market. Meanwhile, car companies such as Wuling, Changan, Nezha, Beijing Hyundai, and SAIC-GM joined the price war and collectively announced major price cuts for various models.

Second, Cui Dongshu, Secretary General of the Passenger Federation, pointed out a few days ago that 2024 is a critical year for NEV companies to gain a foothold, and competition is bound to be very intense.

Finally, Xiaopeng Motor, the representative of the new car builder, released the first “physical” letter from all employees in the Year of the Dragon on February 18. It mentioned that 2024 is the first year for Chinese car brands to enter the “sea of blood” competition, and a “slaughter” in fierce competition is inevitable. Geely also stated that it is ready for intense competition in 2024. In the “Commencement Letter” released on the same day, Geely Automobile Group CEO Gan Jiayue pointed out that 2024 will be the most “volumized” year.

However, the fourth meeting of the Central Committee on Finance and Economics recently pointed out that it is necessary to promote the renewal and technological transformation of various types of production equipment and service equipment, encourage trade-in of traditional consumer goods such as automobiles and home appliances, and promote the trade-in of durable consumer goods. This move has allayed market concerns to a certain extent.

As of press release, Zero Sports Auto (09863.HK), BAIC Motor (01958.HK), Geely (00175.HK), and Great Wall Motor (02333.HK) had risen 7.23%, 2.64%, and 2.54% respectively.