The market overreacted to Nio’s (NYSE:NIO) production stoppage. And a bullish correction saw Nio stock (NIO -3.77%) increasing its price on Tuesday, reaching 5.3% at 11:10 am ET, after sharp declines in the previous days.
A prominent investor’s interest in electric vehicle (EV) stocks has led investors to feel that Nio’s decision to stop manufacturing was overblown. A report by CnEVPost said Nio ceased manufacturing after some of its suppliers were forced to shut down due to the COVID-19 lockdowns in China, causing its stock to plummet on Monday morning.
As a result of the company’s decision to stop manufacturing, delivery of its cars, including the ET7 flagship sedan, would be delayed. The ET7 began shipping to customers on March 28, according to Nio.
According to Nomura analyst Martin Heung, Nio’s manufacturing lines are only closed on weekends, who said this morning that the company’s announcement of a production stop applied only to weekends. According to TheFly.com, Heung said this based on his discussions with the company’s management.
As Nio’s stock dropped so sharply on Monday, it appeared that the market thought the manufacturer had entirely stopped manufacturing until further notice. Of course, that is a significant event. However, if the corporation still produces automobiles, it may not have jeopardized its 2022 targets.
Heung also noted that if the pandemic lockdown doesn’t expand beyond Shanghai, Nio is confident that its second facility at NeoPark will start production in the third quarter. As a result of the complete city lockdown, companies like Nio, located in the city’s financial district, have also been impacted. In addition, there has been no activity at the Tesla Gigafactory in Shanghai, China, since March 28.
Although Nio’s production has been halted and its share price has fallen recently, long-term investors have not been discouraged. When asked about Nio by Yahoo! Finance Today, ARK Invest’s Cathie Wood reminded the market of her interest in the company.
The Chinese government’s emphasis on “shared prosperity” to close the wealth gap implies that high-margin companies like Tesla are on the government’s radar, argues Wood. In addition, radar is a potential partner in expanding China’s transport options. As a result, Nio’s designs also received approval from Wood.
Wood, a fund manager at ARK Invest, first bought Nio shares on March 25 while simultaneously selling Tesla shares. Nio’s actions were triggered thanks to her interview today and Nomura’s big announcement.
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