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Why Nio Stock Popped Tuesday

By Howard Smith – Sep 7, 2021 at 11:37AM

Key Points

  • Nio has plans in place to double current production capacity.

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The largest automotive market in the world is expected to almost triple sales of new energy vehicles.

What happened

Chinese electric vehicle (EV) maker Nio (NIO 21.14%) concerned investors with a recent cut in guidance due to supply chain constraints. But comments from the vice minister of China's Ministry of Industry and Information Technology that were reported over the weekend gave shares a boost Tuesday morning. After rising as much as 3.7% early today, Nio shares were still almost 3% higher as of 11:05 a.m. EDT. 

So what

At an industry conference hosted by the China Automotive Technology and Research Center, Xin Guobin said that the world's largest automotive market is expected to almost triple sales of new energy vehicles in the first eight months of 2021 compared to 2020, Reuters reported. He said sales of battery electric, plug-in hybrid, and hydrogen fuel-cell EVs should hit 1.7 million through August 2021, compared to 600,000 in the same prior-year period. 

Nio ET7 luxury electric sedan in front of city skyline.

Nio expects sales of its ET7 luxury electric sedan to begin in early 2022. Image source: Nio.

Now what

Xin also said overall auto sales in China should grow 10% through August to more than 16 million, compared to the comparable period last year. He added that Chinese authorities will improve recent supply issues of crucial metals. 

That's good news for Nio, which just lowered its outlook for vehicle deliveries for the third quarter of 2021 due to supply chain constraints. The company has renewed a manufacturing agreement with its state-owned partner through 2024, with plans to double capacity. Nio also has three new products it plans to launch in 2022, including the ET7 luxury electric sedan. 

Investors today are taking the comments from the Chinese official as good news, hoping the company will continue to grow and successfully navigate the current supply chain issues. 

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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