Nio (NIO 1.46%) investors are trying to balance new catalysts for the Chinese electric-vehicle (EV) maker with a short-term issue that has Nio's production on hold. That dichotomy had Nio's American depositary shares jumping as much as 3% in early trading Tuesday, before reversing course. As of 1:04 p.m. ET, shares had retreated and were down 0.6% from Monday's closing price.
Nio started deliveries of its newest offering -- and first sedan model -- late last month. The ET7 is a luxury sedan that will compete with Tesla's (TSLA 1.56%) Model S, which it makes in the U.S. company's Shanghai factory. Even after Tesla had announced a price increase for its China-made vehicles, Nio held firm on its pricing. But now, Nio is being hit with two items of bad news.
The company joined Tesla and other Chinese EV makers announcing a price increase for its SUV models -- though it held its pricing for the new ET7 and the mid-size ET5 sedan that it will begin shipping later this year. Additionally, Nio now has had to suspend production due to a shortage of parts that come from other areas in China that are currently locked down to stem a growing spread of COVID-19.
The lockdowns in China will pass, but the impacts on this quarter will be noticeable, and the stock is dropping partially due to this short-term issue. Nio plans to expand beyond Norway into other countries in Europe this year, and a reduction in production volume won't help that expansion.
Investors should expect more volatility in the stock until the production-delay situation is resolved. But longer term, investors should be watching how the increase in vehicle prices may or may not impact demand.