The Chinese electric vehicle (EV) market is getting volatile as more automakers opt for price cuts. So far, this trend isn’t going well for Nio (NYSE:NIO, a company working hard to compete with its larger rivals. NIO stock recently hit a low for the year, dipping below $4 per share.
Shares of Nio have been declining for months, but this recent poor performance is due to the price cut trend sweeping across China’s EV market. Tesla (NASDAQ:TSLA) recently slashed prices on some of its most popular models. And as Tesla goes, so goes the rest of the sector. Li Auto (NASDAQ:LI) just followed Tesla’s example, cutting prices on its own EVs.
So far, these price cuts haven’t gone well for either company. But does this development mean investors should be skipping on Nio, or passing on Chinese EV stocks all together? Let’s dive into what this means for NIO stock and its peers.
What’s Happening With NIO Stock?
It may seem odd that NIO stock fell on a day when only its peers had news to report. But today’s earlier performance is a clear commentary on the state of China’s EV sector and the many challenges it’s facing. Of course, Nio actually closed today in the green while both LI and TSLA stock closed down by 5% and 3%, respectively. This doesn’t mean that demand for new energy vehicles in China is lacking, but it does demonstrate that the competition is fierce — and only getting fiercer. The Wall Street Journal reports:
“The price cuts came as new data showed that, for the first time, China sold more electric and hybrid cars than internal-combustion vehicles. Retail sales of new-energy cars, which include EVs and plug-in hybrids, made up 50.4% of all passenger-vehicle sales in the first two weeks of April, according to data the China Passenger Car Association released over the weekend.”
The fact that TSLA stock has been falling since the company announced price cuts should tell investors everything they need to know. Despite its efforts to spur sales, the market isn’t responding well. Two companies that announced lower EV prices closed in the red today while NIO stock moved on no company-specific news. Indeed, Nio hasn’t had a major catalyst since last week, when it announced a charging network agreement with a General Motors (NYSE:GM) joint venture.
Hitting a low for the year is never good news, but NIO stock has already rebounded. Today, the stock seems to have fallen victim to industry-wide trends more than anything. Whether or not Nio can stay in the green remains uncertain. However, the recent low point isn’t necessarily a reason to write off shares.
On the date of publication, Samuel O’Brient 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.
