What happened
Shares of Chinese electric car company Nio (NIO 3.87%) dropped 2.5% as of 12:15 p.m. ET today on some rather curious news. As DigiTimes Asia reports, the Chinese electric car powerhouse is now looking into making ... cellphones.
So what
If true, that sounds like a strange move for Nio, but as DigiTimes explains, it kind of makes sense in an odd way, because Nio "reportedly plans to make its own phones designed specifically to interact with its cars."
Additionally, the tech news site observes that smartphone specialists such as Xiaomi, Huawei, Sony, and even Apple are all looking into the idea of designing their own electric cars. And if turnabout is fair play, well, then it perhaps shouldn't be too surprising that an automaker might be intrigued enough by this news to explore whether moving in the opposite direction also makes sense.
For that matter, Nio rival Geely Auto actually already did enter the smartphone business last year, notes DigiTimes. So if Nio does go in this direction, it won't even be the first car company to do so.
Image source: Nio.
Now what
All that being said, investors today don't seem thrilled with the idea of Nio potentially diworsifying its business into cellphones -- a hotly contested market in which it has no real experience. Not only might the company's foray into phones fail but also simply making the attempt to expand into a new market could distract management from its primary task of turning Nio into a profitable automaker.
With $1.5 billion in net losses over the past 12 months still dogging it, maybe now isn't really the time for Nio to go and try to change lanes.
