Chinese electric vehicle (EV) maker Nio (NYSE:NIO) stock fell overnight as it reported a wider loss and delivered 22% fewer cars than in the previous quarter.
NIO stock opened at $10.23 per share, down 7% from the previous close, and a market capitalization of $19.5 billion after reporting a loss of 45 cents per share on revenue of $1.2 billion. The net loss was up almost 28% from the second quarter.
The fall would have been greater had the company not guided toward deliveries of 55,000-57,000 cars in the current quarter, double last quarter’s output.
Investors were told to expect better results.
Nio Failings
American investors now need to balance Nio’s plans against both its recent performance and that of the Chinese economy. The ongoing collapse of the real estate market, with investors abandoning names like Evergrande, is hurting sentiment.
U.S. Commerce Secretary Gina Raimondo sounded a conciliatory note in her talks with Chinese leaders in Beijing. That may be the most bearish news of all.
Nio has been dependent on government support since 2020, when it took a bailout from the city of Hefei and committed to a local supply chain. The company also has a unique business model, built on quick battery swaps, that made it early to the export market.
Nio’s business model has been the tip of the spear when it comes to Chinese demands on the American market. CEO William Li recently complained about U.S. tariffs and subsidies that keep him out of this market while Tesla (NASDAQ:TSLA) gets unfettered access to China. Lost in that was the fact that Tesla’s biggest factory is in Shanghai.
Despite Nio’s losses, Chinese auto stocks trading in New York are up over the last week. XPeng (NASDAQ:XPEV) has led the way with a gain of 14%. Polestar (NASDAQ:PSNY) is up 5% and Nio is up 3.5%. Li Auto (NASDAQ:LI), the hybrid maker, has reported the strongest results and is up by 2.5%.
NIO Stock: What Happens Next?
American investors have been forgiving of Chinese EV stocks even while U.S. sales of EVs seem to be faltering. That may not last.
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.
