What occurred
Electrical automobile (EV) maker Nio ( NIO -4.19% ) was one of many newest automakers in China to be affected by lockdowns put in place to deal with an increase in COVID-19 instances. At the moment, a report stated its manufacturing is ramping again up, however Nio shares are dropping anyway. As of 11:51 a.m. ET, the inventory was down 3.9% from Wednesday’s closing value.
So what
A report in Barron’s at present stated the corporate has resumed operations at its Hefei manufacturing facility after suspending them on Saturday. The plant itself, which is about 300 miles from Shanghai, wasn’t instantly impacted by lockdowns applied in that metropolis. However its provide chain was disrupted, with Nio saying in an announcement over the weekend, “provider companions in a number of locations together with Jilin, Shanghai and Jiangsu suspended manufacturing one after the opposite and have but to get better.”
Picture supply: Nio.
Now what
The manufacturing delay comes simply after Nio started delivering its latest providing, the ET7 luxurious sedan. However the market response at present is admittedly no totally different than it has been this week after the manufacturing delay was introduced. Aside from a short preliminary drop when the market opened on Monday, Nio shares hadn’t priced in any significant lack of manufacturing. Shares had really been up barely from final Friday’s closing value going into at present’s session.
Nio shares are buying and selling extra in step with different know-how and development shares, and never essentially reacting to the manufacturing information. In the end, traders will choose Nio on the way it continues to develop its gross sales and advance towards profitability. Along with the ET7, the corporate will start manufacturing of a smaller sedan mannequin later this yr. Additionally it is anticipated to introduce a brand new SUV in 2022 because it expands its geographic attain past China to Europe. Buyers ought to watch what the corporate has to say when it subsequent gives an operational replace. To date, traders do not appear to really feel that its gross sales development might be meaningfully impacted by this week’s manufacturing delay.
This text represents the opinion of the author, who could disagree with the “official” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis – even one in every of our personal – helps us all suppose critically about investing and make selections that assist us develop into smarter, happier, and richer.
