Shares in Chinese electric vehicle (EV) maker Nio (NYSE:NIO) rose 11% on June 24 on hopes for the Chinese economy.
China’s government said it has plans aimed at raising domestic demand. Before the announcement, Nio was among the companies invited to meet with the state’s planning commission. It apparently got what it wanted.
Shares rose 4% overnight to open this morning, July 25, at $12.34 per share, a market cap of over $21 billion.
Nio Needs Help
Nio last announced earnings on June 9. It lost nearly 50 cents for every dollar it took in. The numbers were generously called “mixed.”
Nio followed that up on July 1 by reporting it delivered 10,717 cars in June, with plans to ramp up production of its ES8 SUV in the current quarter. Two weeks later, it announced a $738 million investment from CVYN, majority-owned by the Abu Dhabi government.
The reaction to this news on Wall Street has been positive. Nio was trading below $7.50 per share in early June. Shares have risen nearly 60% since then.
In China, Nio faces price cuts by Tesla (NASDAQ:TSLA), mid-market growth from BYD (OTCMKTS:BYDDF), and hybrid SUVs from Li Auto (NASDAQ:LI). But Nio is one of the first Chinese EV makers to launch an export strategy, including expensive battery swap stations. The Abu Dhabi investment may lead to Nio exports to the Middle East. That would improve its financial situation.
Nio also needs domestic sales to support the export strategy, and government support can help. That’s what the National Development and Reform Commission (NDRC) seems poised to offer. It said specifically it wants to spur growth in transportation and clean energy.
NIO Stock: What Happens Next?
Even NIO bulls admitted the second quarter numbers were “uninspiring.”
There is a lot of hope built into the latest announcements. Nio is still losing money, so the stock should be classed as a speculation. But if it can get by with a little help from its friends, that’s a win for investors.
As of this writing, 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.
