Is Nio’s (NYSE:NIO) just-announced collaboration with China-based die-casting parts supplier Wencan Group good news, or not? It seems that financial traders are having trouble making up their minds about this, as NIO stock popped but then promptly dropped earlier today.
Here’s the scoop. According to a report from CnEVPost, Nio recently entered into a five-year strategic partnership with Wencan Group. Wencan Group is a supplier of one-piece die-casting parts.
Apparently, this will be a multifaceted partnership. First of all, Nio and Wencan Group will “collaborate on supply, low carbon, digitalization and globalization,” to support Nio’s supply needs at the automaker’s Hefei plants.
Furthermore, Nio and Wencan Group will collaborate on lightweight research and development (R&D) of “integrated die-casting structural parts for the body and new material applications.” Along with all that, the two companies will “explore” various products. These will include “integrated battery boxes, core electric vehicle components and automotive chassis.”
What’s Happening With NIO Stock?
Supply chain disruptions have plagued global automotive manufacturers since the onset of the Covid-19 crisis. So, Nio’s shareholders should probably be glad to learn about the company’s collaboration with a well-known parts supplier.
Yet, Wall Street can be unpredictable sometimes. NIO stock rallied to $9.13 soon after the opening bell rang. However, shares soon declined and were down 1% as of 10:30 a.m. Eastern today.
Perhaps this happened because Wencan Group reportedly “aims to supply products” to Nio “by 2025.” In other words, this arrangement won’t fulfill Nio’s near-term automotive parts supply needs.
Additionally, Nio already signed an auto parts supply deal with Ningbo Tuopu Group earlier this month. Hence, it’s not earth-shattering news that Nio is now working with another automotive parts supplier.
Since it’s a long-term partnership, Wencan Group’s deal with Nio could greatly benefit both companies later on. For now, however, NIO stock traders don’t seem particularly impressed and aren’t in much of a buying mood.
On the date of publication, David Moadel 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.