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Why Nio Stock Jumped Higher on Friday

By Howard Smith – Oct 15, 2021 at 12:30PM

Key Points

  • The market for electric vehicles in China continues to grow as evidenced by recent data from other large auto manufacturers.

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The company has completed one phase of an expansion that will allow it to more than double capacity.

What happened

Highly followed Chinese electric vehicle maker Nio (NIO -5.43%) is making an unusually large move in the market today. With the trading volume of its American depositary shares (ADSs) already at 75% of its daily average at 11:45 a.m. EDT, shares were up 4.3%. The stock was up 5.5% earlier on Friday at its highs of the day. 

So what

Nio has been working on expansion plans as it anticipates growing demand in China and elsewhere. It has opened a division in Norway and made its first shipment outside of China there. The company has further plans to expand into Europe. That growth was to be helped by a new factory being built with its manufacturing partner JAC Motor. Construction began on April 29 on a new industrial park in collaboration with the city of Hefei, China.

Nio ET7 luxury electric sedan on street.

Nio's ET7 luxury electric sedan will be available early next year. Image source: Nio.

The park is to include the new factory, and is said to double the company's capacity to 240,000 vehicles annually. Nio told Reuters today that with added shifts, the company's total capacity could actually jump to 300,000 vehicles per year, and that it has completed one phase of the expansion, as reported by Yahoo! Finance.

Now what

Investors are excited about that expansion, and recent news from competitors indicates the market for EVs in China remains quite robust. Tesla's Shanghai factory set a monthly production record in September, and more than 70% of those vehicles were sold within China.  

Today, Ford reported that year to date, its sales in China have reached almost 457,000 units, up 11% versus the prior-year period. That compares to a drop of 7% globally through September.

Nio has been counting on a growing market in China for new energy vehicles. There is now mounting evidence that this is happening. With its expansion plans progressing, and the establishment of its business in Europe, investors are starting to get a feel for how the company can grow into its expectations. 

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

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