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Nio Stock Surges As Goldman Upgrades Tesla's Upstart China Rival

Nio shares have cratered since July, but analysts at Goldman believe the worst times are behind the Chinese electric vehicle maker that hopes to challenge Tesla in the coming years.

Nio  (NIO) - Get NIO Inc. Sponsored ADR Class A Report shares traded sharply higher Thursday after the China-based Tesla  (TSLA) - Get Tesla Inc Report rival was upgraded to 'buy' at Goldman Sachs. 

Goldman Sachs analyst Fei Fang lifted his rating on the electrified carmaker to 'buy', from 'neutral', while leaving the company's price target unchanged at $56 per share, noting that the Shanghai-based group had lost $28 billion in market cap since peaking in July.  

"We believe Nio’s positioning of the ET7 is strategic. The product design, such as the wheelbase, is in the same class with peer full-size premium sedans including Mercedes S-class and BMW 7 series," Fang wrote. 

Nio's U.S.-listed shares were marked 7% higher on the session in late-morning trading to change hands at $36.02 each. 

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Although a much-smaller rival to Tesla in the world's biggest car market, Nio is growing sales at a faster rate: its September quarter tally of 24,439 delivers was dwarfed by Tesla's record of 241,300, but its growth rate of 100.2% was 30 percentage points ahead of Elon Musk's. 

Goldman's checks show that electric vehicle sales penetration is progressing, market shares are consolidating towards the top manufacturers and the firm expects demand to be catalyzed by new model launches. 

Nio introduced the ET7 as its fourth passenger vehicle model and its first sedan product in January. And Goldman sees the price point, more on par with the Mercedes E-class and BMW 5 series, as being a big selling point for the company. 

Nio is also expanding internationally, announced its "Norway Strategy" in May. The company recently opened Nio House in Oslo and launched ES8 in that country. The company plans to launch the ET7 there in 2022.

The company plans to add 20 Nio House and 120 Nio Space retail locations in 2021, bringing its total store count to 366 by the end of the year.