What happened
Electric vehicle (EV) maker Nio (NIO 2.15%) was one of the latest automakers in China to be affected by lockdowns put in place to address a rise in COVID-19 cases. Today, a report said its production is ramping back up, but Nio shares are dropping anyway. As of 11:51 a.m. ET, the stock was down 3.9% from Wednesday's closing price.
So what
A report in Barron's today said the company has resumed operations at its Hefei manufacturing facility after suspending them on Saturday. The plant itself, which is about 300 miles from Shanghai, wasn't directly impacted by lockdowns implemented in that city. But its supply chain was disrupted, with Nio saying in a statement over the weekend, "supplier partners in several places including Jilin, Shanghai and Jiangsu suspended production one after the other and have yet to recover."
Image source: Nio.
Now what
The production delay comes just after Nio began delivering its newest offering, the ET7 luxury sedan. But the market reaction today is really no different than it has been this week after the production delay was announced. Other than a brief initial drop when the market opened on Monday, Nio shares hadn't priced in any meaningful loss of production. Shares had actually been up slightly from last Friday's closing price going into today's session.
Nio shares are trading more in line with other technology and growth stocks, and not necessarily reacting to the production news. Ultimately, investors will judge Nio on how it continues to grow its sales and advance toward profitability. In addition to the ET7, the company will begin production of a smaller sedan model later this year. It is also expected to introduce a new SUV in 2022 as it expands its geographic reach beyond China to Europe. Investors should watch what the company has to say when it next provides an operational update. So far, investors don't seem to feel that its sales growth will be meaningfully impacted by this week's production delay.
