What happened
Nio (NIO -5.35%) is having a rough ride this week, with shares of the electric vehicle (EV) maker tumbling 13.8% through the week as of 10:30 a.m. ET Friday, according to data from S&P Global Market Intelligence. Funnily enough, Nio is all set to host its annual Nio Day this weekend and has even released a teaser of a new model it'll unveil on Dec. 18.
So why the bloodbath? Blame the two Cs: China and competition.
So what
Nio shares got the first big jolt on Monday, and the pessimism stayed put in the days that followed. It's all because Nio is based in China, and the U.S. Securities and Exchange Commission (SEC) is tightening its scrutiny on foreign stocks.
Specifically, the SEC is implementing a law that'll require foreign companies to submit accounts and other documentation for audit, failing which their stocks could be banned from trading on U.S. stock markets. China is already notorious for non-compliance with the disclosure rules in the U.S., which is why Chinese stocks like Nio have been the hardest hit after the SEC development.
Image source: Getty Images.
Meanwhile, after keeping global markets on tenterhooks for weeks, Chinese property developer Evergrande Group has defaulted on its debt payments, fueling fears of a potential property and financial crisis in China that could stall the economy's growth. Nio certainly wouldn't want to see its home and largest market cool down.
Meanwhile, competition continues to heat up. In China, for example, archrival XPeng (XPEV -3.48%) is looking to start deliveries of its G9 SUV fitted with an advanced supercharger by the second half of 2022. BYD (BYDDY -1.16%), which has the highest number of top-selling EVs in China, just reported that its November new energy vehicle sales soared 252.7% year over year to 90,121 vehicles. BYD's Tang SUV is also already available in Norway, which coincidentally is also the first international market that Nio has entered.
Also, legacy automaker Toyota Motors (TM -0.54%) announced on Dec. 14 it'll invest a whopping $70 billion on all kinds of electric vehicles between 2022 and 2030, with half the amount earmarked for battery-electric vehicles.
That's a lot to digest in a week for Nio shareholders.
Now what
Nio Day should not only be all over the headlines next week, but may also decide where Nio stock is headed. Nio's event theme, "Hello World," seems to hint at the company's international growth plans, and that could be the focus on Dec. 18.
Importantly, Nio has already confirmed it'll launch a new electric car model, but speculation is ripe that there could be more than one model launch. Industry experts expect the confirmed model to be the low-priced mid-sized sedan ET5 that could compete with Tesla's Model 3. With Nio also expected to update timelines for its flagship sedan ET7, the coming week could look very different for the stock if the company can impress on Dec. 18.
