Nio Stock Forecast: NIO rallies 5% as price cuts, slowing inflation support markets
- Nio cuts model prices by $4,200, though Q1 vehicle margin dropped to 5.1%.
- New Nio customers will lose access to free battery swapping.
- May deliveries from the EV company dropped 12% YoY.
- NIO stock breaks above 50-day moving average, targets 200-day MA.
Nio stock jumped 6.4% at the open on Tuesday, rising to just under $9 per share, where it is staying at the time of writing, almost two hours into the Wall Street trading session. NIO bullish price action comes in response to Monday's news of price cuts, but the US Consumer Price Index released Tuesday morning has also left the market quite bullish as May inflation arrived below expectations.
It was only two months ago that Nio (NIO) management was certain they did not want to react to Elon Musk’s drastic price cuts over at Tesla (TSLA). Now, the executive suite at one of China’s foremost EV upstarts has made an about-face. On Monday, the first session after Nio’s first-quarter earnings results led to a sell-off, CEO William Li announced that all models would see their price tags reduced by 30,000 Chinese Yuan (about $4,200).
In response, NIO stock climbed 8.7% to $8.40 on Monday.
Nio stock news: Free battery swapping ends for new buyers
Back in April when Tesla CEO Elon Musk signaled a new round of price cutting at the leading (battery electric vehicle) BEV automaker, Nio ignored the move.
“We will certainly not join the price war,” William Li said at the time, adding that the company was focused on its value to customers by adding more battery-swap locations.
Last Friday’s Q1 results were less than impressive, however, as the automaker continued to shed gross margin and experience a slowdown in sales, as well as guiding for a weak second quarter as well. In order to protect against even higher losses, the company is ending its free battery-swapping service for new buyers, although it will remain free for prior customers.
"In the face of the changing market, we will observe the dynamics of the operating environment and competition landscape promptly, and continue to strengthen our competitive advantages," said CFO Steven Wei Feng. "We will stay focused on execution, optimize cost structure, and further improve our operating efficiency."
Nio delivered just 6,155 electric vehicles in May – a 12.4% decrease YoY. This was not as poor as rival XPeng’s (XPEV) 26% YoY decline, but Li Auto (LI) at the same time grew its sales 146% from May 2022. The latter’s success is likely due to its similar strategy to China’s biggest EV manufacturer – BYD (BYDDY). Both automakers produce plug-in hybrid electric vehicles (PHEVs) that also offer gasoline-powered back-up engines. The hybrid variety is more popular with the Chinese market than pure BEVs.
Nio’s vehicle gross margin in the first quarter dropped to 5.1%. Just one year ago, this figure had reached 18%. Now for the second quarter, management expects deliveries around a midpoint of 24,000, which would be a greater than 8% cutback YoY.
NIO FAQs
What is Nio?
Nio is a designer and manufacturer of electric vehicles based in Shanghai, China. Formerly known as NextEV, the company changed its name to Nio in 2017. Nio trades under the NIO symbol on the New York Stock Exchange (NYSE) and under the 9866 tag on the Hong Kong Stock Exchange. The company was incorporated in 2014 but went public on the NYSE in September 2020 with a $1.8 billion initial public offering. William (Bin) Li is the CEO of Nio, which he co-founded with President Lihong Qin, another Chinese business executive.
How is Nio different from other EV manufacturers?
The main difference with other major EV brands like Tesla is that Nio offers battery swapping technology in addition to normal charging options. These swap stations allow drivers to switch out their batteries for fully-charged, identical batteries in less than five minutes, which allows owners to drive long distances without needing to stop for an hour to recharge like most other EVs. At the end of 2022, Nio had 1,305 battery swap locations and built its first swap station in Norway in May 2022. The goal for the customer is to reduce range anxiety.
What vehicles does Nio offer?
Nio began its reign with the EP9 sport car back in 2016, and the vehicle is still being produced on a small scale. Since then, Nio has branched off into more mainstream fare. The ES8 was introduced in 2018. It is a full-size SUV with a range of 311 miles. The ES6 SUV dropped the following year and has a range of 379 miles. The smaller EC6 SUV arrived in 2020, and the ET5 and ET7 sedans were released in 2021 – the latter two with versions capable of achieving 621 miles of range. The ES7 and EC7 arrived in 2022 and 2023, respectively.
Are Nio vehicles sold outside China?
Yes. While the vast majority of Chinese automakers focus wholly on the Chinese market, Nio began its foray into Europe in late 2021. After beginning in Norway, Nio began entering the German, Danish, Dutch and Swedish markets in 2022 with plans to expand throughout the rest of the decade. Although they are not yet sold in the US, Nio vehicles are being tested in California under that state’s autonomous driving program.
Nio stock forecast: Breaking out of a medium-term downtrend
Nio broke and closed above a medium-term top trendline on Monday. The descending trendline began at least on January 24 and has kept price trending downward for the last five months. NIO stock broke above the trendline on Friday, but the poor Q2 guidance resulted in the stock falling back below the point of resistance.
Likewise, NIO’s share price closed above the 50-day moving average. Now the 200-day sits above at $11.30. Before that, bulls will need to conquer the $9.50 level of support-turned-resistance and the $11.81 shoulder pattern of resistance that surrounds January’s range high that melted in the $13 to $14 supply zone.
NIO daily chart
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Author
Clay Webster
FXStreet
Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.
