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NIO (NIO) Tanks 9% On Covid-19 Production Halt, What’s Next?

Ollie Martin - AskTraders News writer
Ollie Martin trader
Updated 11 Apr 2022

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Key points:

  • NIO stock dropped as much as 9% this morning on news of production suspension
  • The company also lags behind the wider Chinese EV market
  • How will Nio stand up to quickly growing Xpeng and Li Auto?

Just as industry is starting to bounce back, and the economy is starting to find its footing in an atmosphere of post-covid optimism, lockdowns are on the rise in one particular part of the world – China. Still operating a zero-tolerance policy, Chinese industry has been thrown back into the dark following various regional lockdowns. For EV investors, it's slightly worrying bearing in mind the burgeoning new energy market that has seen US listed companies such as Nio, Xpeng and Li warrant particular attention. 

All eyes are on Nio this morning after the company announced over the weekend it will be suspending production due to Covid-19 restrictions causing unmanageable supply chain issues. Since March, the company’s supplier partners in Jilin, Shanghai and Jiangsu have all suspended production, struggling to recover from the unprecedented environment. This doesn’t bode well for Nio at a time when the Chinese market has never been more competitive, the company announced that there will be a delay of vehicle deliveries in the near future. 

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Luckily for the company, it isn’t just Nio suffering. Covid cases in Shanghai also prompted local officials to shut the Tesla facility in March, but this was somewhat outweighed by the new Gigafactory in Berlin. Looking at the broader picture, Nio sales are also lagging behind the wider growth of the Chinese EV market. Whilst battery electric sales grew about 120% year on year, Nio’s March sales grew just 40%. The idle growth of Nio could be another reason for selling pressure, especially given the tightening landscape and the head-to-head nature of EV investment. 

This is a critical time for Nio. Halting production will have seriously worrying effects on delivery expectations, as well as knocking consumer confidence. Covid has the potential to keep rearing its head in the future, so how will companies navigate the potential of extended factory suspensions? What effect will this have on the wider EV market?

Ollie Martin - AskTraders News writer
Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.