Electric vehicle (EV) stock Nio (NYSE:NIO) tumbled on Friday, and it wasn’t just the overall bloodbath in the stock markets that sent the stock tumbling. A couple of big news reports out of China, Nio’s domestic market, are spooking investors in the hot EV stock even more. All told, its shares were trading down around 4.5% as of 11:30 a.m. ET today.
Fears about a new coronavirus variant with several mutations found in South Africa has rattled economies across the globe, with the U.S. stock markets getting hit especially hard as the development comes bang in the middle of peak holiday travel season.
The U.S. reopened its borders to international travelers from all countries on Nov. 8, and reports on travel data already suggest that this Thanksgiving is set to be the busiest since the pandemic, based on the number of airline passengers screened.
While fresh COVID fears sent several stocks plunging on Friday, it coincided with another jarring development in China that’s making investors in Chinese stocks, including Nio, nervous.
Chinese regulators have reportedly asked ride-hailing company DiDi Global (NYSE:DIDI), to delist its shares in the U.S. over concerns about the company leaking sensitive data, according to Bloomberg. DiDi has come under fire from China’s regulators, primarily over data security concerns, ever since it listed its shares on the New York Stock Exchange some months ago. An order to delist in the U.S., however, is unprecedented and reflects the extent of China’s crackdown and influence on a company’s operations.
Although Nio has been one of the “safer” Chinese stocks so far as Chinese regulators have primarily targeted tech stocks lately, investors in the EV maker are still getting jittery.
Meanwhile, competition continues to heat up in China’s EV market, with archrival Tesla (NASDAQ:TSLA) hinting at plans to invest $200 million to expand production at its Gigafactory in China. Barely days ago, Elon Musk suggested Tesla’s flagship sedan, the Model S Plaid, could be available in China as early as March 2022. Nio, called the “Tesla of China,” aspires to overtake the EV giant in that country.
The broader market sell-off, China’s crackdown on DiDi, and hints from Elon Musk may have hit Nio shares on Friday, but the company appears undeterred by competition and is laser-focused on its growth plans. On Nov. 25, for example, it signed an agreement with Royal Dutch Shell to jointly build and operate battery charging and swapping stations. Plans include pilot stations in Europe in 2022 and installing 100 swapping stations in China by 2025.
Nio’s battery-as-a-service (BaaS) program is a major competitive advantage. It offers customers the option to buy cars without batteries (saving up to $10,000 per car) and subscribe to the program to charge and swap batteries at Nio’s stations as needed.
The company also just announced it has started setting up a factory at its NeoPark EV industry park in China, with the first trial vehicle expected to roll out of there in the second quarter of 2022. It’s a milestone for Nio as NeoPark will be its second factory.
Its much-awaited flagship sedan, the ET7, is also on track for launch next year, so investors might want to think twice before pressing the panic button on Nio on sell-off days like Friday.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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