Chinese automaker Nio (NYSE:NIO) has been falling all day as it struggles against several industry headwinds. Nio isn’t the only EV stock that is down. On the contrary, many of its peers both at home and abroad are suffering. Bad news from multiple fronts has collided to suppress EV makers. Industry leader Tesla (NASDAQ:TSLA) received a warning that doesn’t bode well for its operations, particularly those in China. This negative market momentum hasn’t been helped by the mounting bankruptcy concerns surrounding Carvana (NYSE: CVNA). Neither story is directly connected to NIO stock, but the negative market momentum they have created is more than enough to drive it down.
Let’s take a closer look at the events that are casting a dark shadow over the EV market today.
What’s Happening with NIO stock?
This week started off well for NIO stock. When China’s government began easing Covid-19 restrictions, stocks across the country started trending upward. As InvestorPlace writer William White reported, investors were hopeful that Chinese markets would finally rebound after months of struggling. NIO was among winners, along with its EV peer Xpeng (NYSE:XPEV).
Today’s declines threaten to undo progress made by Chinese EV stocks. NIO stock is down almost 6% for the day and despite a slight rally, it remains firmly in the red. Shares are down almost 50% over the past six months.
With this in mind, an in-depth look at the forces pushing NIO down is warranted. This morning, Bernstein issued a warning that it foresees Tesla implementing further price cuts in China to raise demand. It also sees Tesla opting for a similar course of action in the U.S. to ensure it qualifies for rebates. Analyst Toni Sacconaghi has highlighted the company’s growing demand issue, reiterating a “sell” rating for TSLA stock.
As grim as that sounds, things are looking far worse for Carvana. CVNA stock has plunged 35% today after a news story sparked bankruptcy rumors. According to reports, several of Carvana’s creditors have agreed to cooperate in restructuring negotiations as per a signed agreement. The company has been struggling for months, but this news could be the last straw for Carvana, pushing it to a point of no return.
With things looking dark for the EV sector, it’s hardly any wonder that NIO stock is falling today.
The Road Ahead
The good news is that while NIO stock is falling today, it isn’t for company-specific reasons but by virtue of broader market forces. As such, it will likely rebound soon as the negative momentum caused by Tesla and Carvana fades away.
As InvestorPlace contributor Vandita Jadeja reports, Nio has enough potential to rival Tesla in the coming years. While 2022 has been difficult, the company is working hard to penetrate international markets and establish itself as a dominant EV player. This is already giving it a clear advantage over its competitors.
On the date of publication, Samuel O’Brient 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.
