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Why Nio Stock Bounced Back Today

By Howard Smith – Sep 2, 2021 at 11:40AM

Key Points

  • Based on record new orders, a slowdown in the rate of growth looks to be temporary.

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Nio isn't the only automaker dealing with the chip shortage, and it may be having less of an impact than some first thought.

What happened

After Chinese electric vehicle maker Nio (NIO 21.71%) released its August delivery and guidance update yesterday, investors immediately began selling. The company's American depositary shares dropped about 4% early in yesterday's trading, though they recovered most of that decline by the end of the day. And those shares are bouncing back more early Thursday, with gains of about 3.5% as of 10:20 a.m. EDT.

So what

With Nio's $66 billion market cap, investors value it on its potential rather than its current business. When the company reported that it delivered 5,880 vehicles in August, and that it was "prudently" lowering guidance for the third quarter due to supply chain issues, some shareholders didn't wait to take money off the table. That level of vehicle deliveries represented a more than 25% sequential drop versus July 2021 deliveries. 

Dark blue Nio ES8 electric SUV in front of wall battery charger.

Nio ES8 electric SUV. Image source: Nio.

But Nio isn't the only Chinese EV maker facing the semiconductor supply issues. Competitor XPeng also reported a sequential drop in its August deliveries yesterday. 

Now what

Nio did give investors some positive news that may have helped investors decide the monthly delivery update provided yesterday shouldn't be the only data point to consider. Nio also said its level of new orders reached an all-time high in August. 

The company's adjustment in third-quarter delivery guidance amounted to a 4% decrease at the midpoint of the estimated range. Nio recently expanded production capacity plans and shipped its first product outside of China to Norway. After letting that information sink in, investors seem to be thinking the slower rate of growth experienced in August will be less impactful in the long run than some perhaps thought at first glance. 

Howard Smith owns shares of NIO Inc. The Motley Fool owns shares of and recommends NIO Inc. The Motley Fool has a disclosure policy.

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