Shares of Chinese electric vehicle maker Nio (NYSE:NIO) are under pressure this morning after the company’s October delivery targets fell short of analysts’ expectations.
NIO stock was down 3.6% in pre-market trading to $38 after announcing that it delivered 3,667 vehicles in October, a decline of 27.5% from the same month of 2020. At the same time, Nio’s biggest rival within China, Xpeng (NYSE:XPEV), announced that it delivered 10,138 cars in October, which was a 233% annual increase and the second-straight month where Xpeng delivered more than 10,000 electric vehicles.
XPEV stock is up 4% in pre-market trading at $48.35 per share.
What Happened With NIO Stock?
Nio said in a press release that its October vehicle deliveries were negatively impacted by upgrades and restructuring of its manufacturing plants that took place between Sept. 28 and Oct. 15, as well as by the ongoing global supply chain crunch and semiconductor shortage. Specifically, Nio said the reconfigurations at its manufacturing facilities halted production of the ES8, the company’s flagship electric SUV. The company says that production of all its vehicles is now back online and running as expected.
Despite the problems experienced in October, Nio also said that its orders reached another all-time high in October due to “increasing user demand.” Still, Nio’s October deliveries were down 65% from this September. And, another Chinese electric vehicle startup, Li Auto (NASDAQ:LI) reported that October deliveries of its Li ONE SUV totaled 7,649, an 8% month-over-month increase. Li Auto was the only Chinese electric vehicle manufacturer to deliver more cars in October than in September.
Why It Matters
The disappointing sales figures for Nio come at a critical moment for the Shanghai-based automaker. The company, which many people on Wall Street view as the main global rival to Tesla (NASDAQ:TSLA), is undertaking a critical expansion into Europe right now. As part of this, Nio announced plans to open dealerships in five more countries in Europe. Over this past summer, it officially made its foray into the continent, launching its brand in Norway. Now, it will move into Germany, the United Kingdom and elsewhere.
In addition to rolling out dealerships, Nio has taken a minority stake in Lotus Cars, a British sports car manufacturer. Together they will “will explore collaboration in areas including high-end intelligent EVs.” This is positive for Nio for many reasons, but the upcoming Lotus Cars IPO is especially promising. It plans to come public as soon as next year, and could be valued as high as $15 billion.
What’s Next for Nio?
The perception that Nio’s growth is slowing or that it is experiencing production problems is hurting NIO stock at a time when it needs investor confidence to remain firm and capital inflows to remain high.
The view that Chinese rivals such as Xpeng and Li Auto are lapping Nio is not good for the company’s stock in the near term. And NIO stock could use some positive momentum. After skyrocketing in 2020, Nio’s share price has slumped 26% year-to-date.
Today’s disappointing delivery numbers now threaten to derail the recent rally and further depress Nio stock. Investors should buckle up for a bumpy ride going forward.
On the date of publication, Joel Baglole held a long position in TSLA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
