Shares in Chinese electric vehicle (EV) maker Nio (NYSE:NIO) briefly fell overnight after the European Commission (EC) said that it would investigate China’s subsidies to the industry.
Reuters reported that Geely (OTCMKTS:GELYF), BYD (OTCMKTS:BYDDF) and state-controlled SAIC could be subject to punitive tariffs. The EC is trying to protect European EV makers like Volkswagen (OTCMKTS:VWAGY). Geely already controls Sweden’s Polestar (NASDAQ:PSNY).
Nio is not part of the investigation.
NIO stock was trading at about $7.25 per share before the market opened this morning. It was down about 2% from its Jan. 11 close before rapidly rebounding into the green after the morning bell. Nio’s market capitalization is about $15.5 billion.
Nio Weakness
While Nio is not state-controlled, it was bailed out by a Chinese state government during the Covid-19 pandemic.
Since then, the company has been disentangling itself. It may buy back factories from state-backed JAC Motors. It has moved to gain more control over its supply chain. It also took $2.2 billion from Abu Dhabi’s Public Investment Fund.
Nio has also been aggressive when it comes to exports. The company is building a dealer network in Europe for the Firefly, which will debut in 2025 at $25,000. Still, Bank of America recently downgraded Nio on concerns about 2024.
European regulators fear a flood of Chinese EVs will destroy their industry. They’re especially concerned about BYD, which sent its first mass shipment of cars to Europe today. The BYD Explorer 1 will carry up to 7,000 cars per voyage.
About half of new car sales in Europe today are electric. Sales are seen slowing as buyers await lower-priced cars like the Nio Firefly.
Nio delivered 18,012 vehicles in December, while BYD made over 340,000.
NIO Stock: What Happens Next?
Analysts believe it will take more than tariffs to slow the Chinese market advance. My own view is that the entire industry is doomed over the next decade. Cheaper batteries and lower-cost software make it untenable.
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.
