Shares in Chinese electric vehicle (EV) company Nio (NYSE:NIO) stock are rising on signs the Chinese economy may be recovering.
The evidence for this is a rise in consumer prices for February, which reversed a six-month trend.
Nio opened on this morning at about $5.93 per share, a market capitalization of slightly over $12 billion. As of this writing, NIO stock is up about 4.5% in early trading.
China Recovery?
Consumer prices in China rose at an annual rate of 0.7% in February. Estimates had been for a 0.3% rise. The country’s Lunar New Year celebrations were given credit.
Experts on China disagreed on whether the rising prices were a blip or a trend. Prices in China rose only 0.2% for all of 2023, well below the government target of 3%.
Producer prices, however, continue to deflate. They were down 2.7% from the year before in February, a sign that China’s growth problems have yet to abate. Premier Li Qiang has set a target of 3% inflation and 5% economic growth for 2024.
Nio rose despite Bernstein analyst Eunice Lee cutting her price target from $7.50 per share to $5.50. Nio’s sales in the fourth quarter of 2023 were up just 3.6% from the prior year.
Nio has been building a dealer network in Europe for its coming Firefly and Alps brands. The company only sells direct in China and needs expensive battery-swap technology to enter the market. The company laid off 10% of its staff last year as it continued losing $35,000 for every car it makes.
However, Abu Dhabi has invested $2.2 billion in Nio for its export push, taking a 20% stake. The emirate has also licensed Nio technology for a luxury EV brand it controls called Forseven.
NIO Stock: What Happens Next?
The fate of Nio depends more on its export push and effort to lower costs than on Chinese consumers. But global markets will appreciate any recovery in China.
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.
