Nio (NYSE:NIO) stock rose 5% over the weekend after the company announced a smaller-than-expected loss for the second quarter and improved deliveries for June.
The Chinese electric vehicle (EV) maker also announced a 5% price cut across its product line but said it would end free battery swapping for new buyers.
NIO stock opened this morning at $8.20 per share, up over 5% over the weekend. Its market capitalization is now about $13.5 billion, with a 2022 revenue of about $7 billion. Shares are down about 20% in 2023.
Slowing the Rollout
Nio reported a net loss of $672 million, $2.91 per share for the March quarter, with sales down marginally from a year ago at about $1.3 billion.
Analysts were troubled by a fall in cash to $2.1 billion. Nio’s response was to cut research and business expansion plans. The price cuts amount to about $4,200 per vehicle.
Among the three Chinese EV makers traded on Wall Street, Nio’s export plans are considered the most advanced. It has built battery swap stations across Europe and pioneered a leasing-only business model. The company now plans to slow its European rollout, saying it won’t break even until the fourth quarter.
Nio said it wouldn’t join China’s EV price war in April, but now it has. Nio insists it will deliver 20,000 cars per month through the end of 2023. It will focus its marketing on China’s rural areas, where EV growth is slowing. Nio delivered just 13,000 cars in May.
Analysts are now worried about Nio’s cash position, with one saying its decision to cut non-core projects is too slow. Nomura Holdings cut its rating on the stock from “buy” to “hold.”
NIO Stock: What Happens Next?
Nio got a boost recently when the Chinese government announced an extension of tax credits for EV purchases. The company also benefitted from a 2020 bailout engineered by the government of Hefei province. But patience is wearing thin, and Nio is now the most troubled of the three Chinese EV makers traded in New York, alongside Li Auto (NASDAQ:LI) and XPeng (NASDAQ:XPEV).
On the date of publication, Dana Blankenhorn did not hold (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.
