Why Shares of Chinese Electric-Car Maker NIO Slumped Again Today
A tough outlook for 2019 has investors in retreat.
What happened
Shares of NIO, Inc. (NYSE:NIO) were down sharply for a second straight day on Thursday, as investors continued to digest the company’s so-so fourth-quarter earnings report and pessimistic guidance for 2019.
NIO’s American depositary shares closed at $7.08 in New York on Thursday, down 11.6% for the day and 30.3% since Tuesday’s close.
So what
There was good news and bad news in NIO’s fourth-quarter earnings report, but the bad news was quite troubling. NIO, a Chinese maker of upscale electric cars that’s often compared to early-stage Tesla, posted a net loss of $509.5 million — greater than expected and despite revenue and delivery totals that beat its own prior guidance.
But investors may be more concerned about the company’s outlook for the year ahead. CFO Louis T. Hsieh said that the company’s deliveries would likely be weak, at least through the first half of the year, due to uncertainty around China’s economy and the status of a government subsidy for buyers of electric vehicles.
Another concern for investors: The company also announced that it has shelved plans to build its own factory. Right now, its vehicles are built in a factory owned by JAC Motors, under contract. NIO had planned to build its own factory nearby and shift its production to its own facility next year, but that plan is now on hold for at least the next two to three years.
Now what
Right now, NIO has just one vehicle on sale — the ES8, an upscale seven-passenger electric SUV. The company (and its investors) hope that its next model, a smaller electric SUV called the ES6 that will go into production in June, will give it a lift in the second half of 2019. But the reality is this: If China’s economy continues to slump, those hopes may be in vain.
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Source: fool
