What happened
Nio (NYSE: NIO) shares are dropping sharply today, one day after it and other Chinese electric vehicle makers announced January deliveries that dropped month over month. Nio reported it shipped 9,652 EVs in January, down 8% from December deliveries of 10,489. Its shares dropped as much as 7.4% in early trading today, and remained down 4.8% as of 2:31 p.m. ET.
So what
Nio wasn't alone in reporting a sequential drop in monthly deliveries yesterday. Rivals XPeng and Li Auto also reported drops of 19% and 13%, respectively, from December 2021 to January 2022. But both XPeng and Li delivered more vehicles than Nio last month. While Nio shares rebounded yesterday after the news, investors today may be taking the view that it is losing to its domestic competitors as the data results were digested more today.
Nio expects to begin shipping its ET5 midsize sedan in September. Image source: Nio.
Now what
Nio has had production impacted by supply chain constraints, as well as work to retool its manufacturing lines in recent months as it plans for expansion. In addition to having announced two new sedan models for this year, the company plans to continue its growth into European markets.
Its new ET7 flagship luxury sedan will begin shipping at the end of March, and the smaller, midsize ET5 sedan should see deliveries starting in September. Even after Nio shares have dropped 25% year to date, its market cap remains at almost $40 billion. But if sales continue to grow as expected, investors might find this a good entry point, as its forward price-to-sales ratio is now below four.
China has cut subsidies for new energy vehicles by 30% this year, and has plans to eliminate them completely at the end of the year. Some investors may be seeing the drop in deliveries as a sign of lower demand. But long-term investors may want to watch and see if Nio's sales hold up enough to justify its current valuation going forward, as global EV demand growth is still expected to continue.
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Howard Smith owns NIO Inc. and XPeng Inc. The Motley Fool owns and recommends NIO Inc. The Motley Fool has a disclosure policy.
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