Why NIO Stock Dropped Friday

The world semiconductor shortage is hitting the Chinese EV maker.

Howard Smith

What came about

Staunch during the last year, gross sales were accelerating at Chinese electric-automobile (EV) maker NIO (NYSE:NIO). On Friday, the company introduced manufacturing will be stricken by the world semiconductor shortage that has impacted utterly different automakers.

Investors reacted by knocking NIO shares down. As of 1: 25 p.m. EDT on Friday, shares were Trading south about 8%. 

So what

NIO said the chip shortage will trigger it to cease manufacturing for 5 days, beginning March 29. The planned downtime introduced on the company to lower first-quarter cargo projections to 19,500 vehicles, down from the previous estimated fluctuate of 20,000 to 20,500.

NIO ET7 luxury electric sedan

NIO ET7 luxurious electric sedan, scheduled to be on hand early 2022. Picture supply: NIO.

Now what

NIO’s growth has been accelerating. The company delivered practically 44,000 vehicles in 2020, more than twice as many as 2019. And even with the reduced supply estimate as a result of the suspension, its first-quarter manufacturing level of 19,500 vehicles would portray more than 400% growth over deliveries reported in the 2020 first quarter.

That level of manufacturing would additionally silent be elevated than what Chinese EV competitor XPeng (NYSE:XPEV) expects for its first quarter. XPeng hasn’t yet said this could additionally be stricken by the semiconductor provide subject but had beforehand told buyers that it estimates first-quarter 2021 deliveries to develop about 450% year over year to 12,500 vehicles.

With NIO’s stock label having grown practically 1,200% in the last year, news of the disruption in operations used to make certain to enlighten a adversarial response from buyers. If the 5-day outage is the extent of the damage, the company’s general valuation ought to not in actuality be impacted in the lengthy high-tail.

This article represents the notion of the author, who could simply disagree with the “official” recommendation popularity of a Motley Fool top charge advisory carrier. We’re motley! Questioning an investing thesis — even one in all our have — helps us all think seriously about investing and get choices that relief us turn out to be smarter, happier, and richer.

Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NIO Inc. The Motley Fool has a disclosure policy.”>

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