China-based electric-vehicle maker Nio (NYSE:NIO) was recently added to a list of approved vehicle manufacturers in China. The decision by the Chinese government will allow Nio, whose EVs are currently made by another firm, to manufacture its own automobiles in the country. NIO stock is slightly higher on this news.
China-based Anhui Jianghuai Automobile Group, which currently manufactures Nio’s EVs, last month disclosed that it intends to sell the two factories that turn out Nio’s EVs.
In the wake of the news, rumors circulated that Nio could look to buy the factories and start making its own EVs there.
That development could significantly raise Nio’s expenses and cause its bottom line to sink in the near and medium terms. Additionally, the move would reduce Nio’s cash reserves, which stood at $27.85 billion, as of the end of Q3.
On the other hand, acquiring the factories would allow Nio to quickly ramp up its production over the longer term, likely speeding up its transition to profitability. Such a development, however, would require the demand for its EVs to increase quickly.
What’s Next for NIO Stock
In November, Nio’s deliveries climbed 12.6% year-over-year to 15,959 EVs, but they fell about 1% versus October. In the first 11 months of 2023, the automaker’s deliveries have soared 33% compared to the same period of 2022.
As of the end of the day on Friday, NIO stock had fallen 10% in the preceding month and 35% in the last three months. It had tumbled 44% in the previous year.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
