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NIO Stock Dips Despite German Expansion Plans


  • Chinese electric vehicle (EV) company Nio (NIO) has seen significant volatility this week.
  • Today’s drop in NIO stock comes on reports that China’s GDP has slowed to a measly 0.4% this past quarter.
  • Concerns about Covid-19 lockdowns appear to be overshadowing the company’s international expansion plans.
NIO stock - NIO Stock Dips Despite German Expansion Plans

Source: Michael Vi / Shutterstock.com

It’s been a rather rocky week for investors in Chinese electric vehicle (EV) company Nio (NYSE:NIO). Earlier this week, NIO stock surged higher on news the company planned to enter the German market with its flagship ET7 model. However, this stock has given up most of its weekly gains today, trading down around 3% at the time of writing.

This move lower comes amid broader volatility in China-based stocks. As a key player in the Chinese EV market, investors are more focused on what’s happening in Nio’s domestic market than its international expansion plans.

China’s zero-Covid policy and Covid-19 restrictions could significantly impact the country’s gross domestic product (GDP) moving forward, a key concern for investors. This past quarter, China reported its GDP slowed to a growth rate of only 0.4%. This is the slowest rate the country has seen since the depths of the pandemic.

Thus, it’s really a story of international versus domestic focus. Right now, investors appear to be focusing in on how well companies like Nio can navigate this environment.

Let’s dive into what investors should take from this news.

NIO Stock: Buy, Hold or Sell?

This week’s news that Nio plans to enter the German market is big. As Chinese companies search for global market share, investors are able to gain exposure to not only the fast-growing Chinese economy, but growing global demand in this sector as well. Given the recent concerns around potential contraction in the Chinese economy, this should be viewed positively.

However, it appears investors are simply more sanguine about the state of the market right now than we’ve seen in some time. Nio’s exposure to the Chinese economy is high. However, unlike Tesla (NASDAQ:TSLA) and other auto manufacturers with significant operations in Shanghai, Nio has actually been able to avoid much of the zero-Covid lockdowns that have hampered its competitors thus far.

In totality, I think Nio is in a good position to maneuver in this environment. While the company’s share price may not reflect this sentiment, it’s clear more volatility will be on the horizon for this stock. Those with a long-term growth perspective may start to find NIO stock attractive at these lower levels.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

Article printed from InvestorPlace Media, https://investorplace.com/2022/07/nio-stock-dips-despite-german-expansion-plans/.

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