Why NIO Stock fell on Friday


What happened

Over the past year, sales have accelerated at the Chinese electric vehicle (EV) maker NIO (NYSE: NIO). On Friday, the company announced that production will be hit by a global semiconductor shortage that has hit other automakers.

Investors reacted by knocking NIO’s stock down. As of 1:25 p.m. EDT on Friday, the stock was trading south about 8%.

And that

NIO said the chip shortage will cause it to halt production for five days, starting March 29. Planned downtime caused the company to reduce first-quarter shipping projections to 19,500 vehicles, down from the previous estimated range of 20,000 to 20,500.

NIO ET7 luxury electric sedan, scheduled to be available early 2022. Image source: NIO.

Now what

NIO’s growth has accelerated. The company delivered nearly 44,000 vehicles in 2020, more than double that of 2019. And even with the delivery estimate lowered due to suspension, its first-quarter production level of 19,500 vehicles would represent a growth of more than 400% over deliveries reported in 2020 first quarter.

That level of production would also be higher than the Chinese electric vehicle competitor. XPeng (New York Stock Exchange: XPEV) wait for your first trimester. XPeng has yet to say that it will be affected by the semiconductor supply problem, but had previously told investors that it estimates that Q1 2021 deliveries will grow around 450% year-over-year to 12,500 vehicles.

Given that NIO’s share price had risen nearly 1,200% in the past year, the news of the halt in operations would surely elicit a negative response from investors. If the five-day outage is the magnitude of the damage, the company’s overall valuation should not be affected in the long run.

This article represents the opinion of the author, who may disagree with the “official” recommendation position for a premium Motley Fool consulting service. We are variegated! Questioning an investment thesis, even one of our own, helps all of us think critically about investing and make decisions that help us be smarter, happier, and wealthier.



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