What happened
Shares of Chinese electric-vehicle maker NIO (NIO 4.50%) were moving higher on Friday after the company reported strong first-quarter results tempered by concerns about the impact of an ongoing shortage of semiconductors.
At 10:45 a.m. EDT, NIO's American depositary shares (ADS) were up about 5.6% from Thursday's closing price.
So what
NIO reported its first-quarter results after the U.S. markets closed on Thursday, and they were good. The company's adjusted loss of $0.04 per ADS was narrower than the $0.10-per-share loss that Wall Street had expected, and its revenue came in above expectations as well.
The story was simple: NIO's profit margins on vehicle sales improved because more buyers chose the optional longer-range 100-kilowatt-hour battery pack and the NIO Pilot advanced driver-assist system. That in turn increased the average transaction price per vehicle NIO sold.
NIO buyers are paying up for longer-range batteries and advanced driver-assist features. That helped NIO move closer to profitability in the first quarter. Image source: NIO.
But the news wasn't all good. During NIO's earnings call, CEO William Bin Li explained that NIO hasn't been able to escape the effects of the global chip shortage that has forced other automakers to reduce production. That concern was probably tempering the stock's gain on Friday morning.
Now what
Li said that he thinks the shortage will likely get worse before it gets better. As he sees it, the current (second) quarter will be the low point for supply, with things improving in the second half of the year -- but it's not clear whether the shortage will resolve by the end of 2021 or linger into 2022.
The upshot is that while NIO now has the manufacturing capability to produce about 10,000 vehicles per month, the shortage of chips will likely limit it to between 7,000 and 7,500 vehicles per month in the second quarter and possibly beyond. Demand for NIO's vehicles remains strong, Li said, but customers and auto investors should be prepared for the possibility that tight chip supplies will limit NIO's growth for at least the next several months.
