It’s time to step to the sidelines on Chinese electric vehicle maker Nio after its latest quarter, according to JPMorgan. Analyst Nick Lai downgraded Nio to neutral from overweight, saying it will be increasingly challenging for the electric vehicle maker to deliver on high expectations. He said that the firm’s fourth-quarter results were a miss because of vehicle margin contraction. “Whilst management at the result call attributed most of the miss to a one-off item related to clearance of old models (ie ES6, ES8 and EC6 before new models on new platform arrive in 1H23), our concern is that 1Q23 margin could trend down further (JPMe vehicle GPM about 5%) while the magnitude of improvement from 2Q23 will be shy of street expectation, considering a challenging competition environment,” Lai wrote to clients on Thursday. “On top of that, we note our 2023 delivery forecast (190k units or 56% growth) is below management’s ambitious target (240- 250k, doubling from 122 in 2022),” Lai added. Nio shares are down more than 9% in 2023, after a roughly 70% tumble last year. In December, Nio lowered its fourth-quarter outlook for deliveries , citing supply chain disruptions from Covid outbreaks in China. The analyst’s new December-2023 price target is $10, down from $14, which implies upside of roughly 13%. The stock fell about 1% in Thursday premarket trading. To be sure, the analyst expects there will be greater volume momentum in the second half of 2023 because of new vehicle models, according to the note. Still, the broader EV industry will have to deal with greater pricing pressure after Tesla’s recent price cuts. “We believe the stock will likely trade sideways in the near term and we would reassess a potential inflection point in mid-late 2Q23, depending on the magnitude of sequential volume and margin improvement where we are directionally positive yet cautious given street expectations are too high, which leaves surprise bias more to the downside than upside, in our view,” Lai wrote. JPMorgan was not the only Wall Street firm to downgrade the stock. Barclays, too, moved its rating to equal weight from overweight in a Wednesday note, saying that it does not expect “large spending slowing down anytime soon.” The firm reduced its price target to $10, from $18. —CNBC’s Michael Bloom contributed to this report.