Mizuho, a highly regarded analyst firm, has recently approached the electric vehicle market with caution, citing a decline in demand. Consequently, the firm downgraded Tesla Inc, Rivian Automotive Inc, and NIO Inc – ADR from Buy to Neutral. Vijay Rakesh, an analyst at Mizuho, has identified weak demand and increasing inventories as the primary factors behind this decision.
Regarding Tesla, the analyst firm downgraded Tesla from Buy to Neutral and decreased the price target from $270 to $195, citing reduced revenue and earnings estimates over the next few years. Rakesh expressed concerns about moderating growth and limited margin leverage at current interest rate levels as potential challenges moving forward.
Similarly, Mizuho downgraded Rivian from Buy to Neutral, setting a price target of $12. The firm anticipates lower deliveries in 2025, attributing this decline to slowing EV demand, challenging execution, and high cash burn. Despite recognising Rivian’s efforts to offer more affordable EVs, the analyst highlighted looming headwinds in the coming years.
In regards to Nio, Mizuho downgraded the company from Buy to Neutral and reduced its price target from $15 to $5.50. The firm expressed concerns about Nio’s short-term outlook following the company’s lowered deliveries guidance for the March quarter. Additionally, the analyst noted Nio’s focus on its “Le Dao” mass-market brand and predicted near-term pressure on gross margins due to planned incentives and a shift towards a high-end market strategy.
In addition to the specific downgrades, Mizuho raised concerns about the overall EV market, pointing to rising auto prices, increased insurance costs, limited affordability, and slowing growth trends. The firm highlighted higher insurance premiums as a significant barrier to EV adoption and noted that EV inventories were up by 92% year-over-year in 2023.
Furthermore, Mizuho warned of weaker demand signals from major EV manufacturers, including Tesla and Rivian. The firm also highlighted the impact of reduced subsidies in major EV markets such as the U.S., Germany, and France, adding to the challenges faced by EV makers in 2024.
Despite the downgrades, the market reaction to Tesla, Rivian, and Nio was somewhat mixed, reflecting the ongoing uncertainty and volatility in the EV sector.
In conclusion, while the electric vehicle market has experienced significant growth in recent years, Mizuho’s downgrades serve as a reminder of the challenges and risks that companies in this sector continue to face. The future of the EV market will likely depend on a myriad of factors, including consumer demand, regulatory incentives, and technological advancements.
Overall, it is important for investors and industry stakeholders to carefully monitor the evolving landscape of the electric vehicle market and make informed decisions based on comprehensive and accurate information.