What happened
Elon Musk stole the spotlight this morning, and his reported comments are hitting the stock prices of many electric vehicle (EV) makers. Nio (NIO 0.66%) is one that shares the Chinese market with Musk's Tesla, and its American depositary shares are being impacted. As of 11:06 a.m. ET, Nio shares were down 4.9% on the final trading day of the week.
So what
Musk sent an email to his executives yesterday telling them to cut his company's workforce by 10% globally and to pause all hiring, as reported by Reuters. And Nio investors should care for several important reasons.
Image source: Getty Images.
Now what
Today's drop in Nio comes after a week of solid gains. That was despite slower growth in sales it reported with its May vehicle delivery update. Nio delivered 7,024 electric vehicles in May, just 5% more than in the year-ago period. But there was a very apparent reason for the slower month. Like many automakers in China, production was impacted by supply chain disruptions after the government imposed lockdowns in large cities like Beijing and Shanghai to address an increase in COVID-19 cases.
But management indicated that short-term issue was being resolved. Nio said it had plans to "further ramp up the production capacity to a higher level by working closely with supply chain partners and to accelerate the delivery recovery starting from June." It attributed those plans to improving conditions related to the lockdowns and strong incoming orders.
But Musk's comment that he feels "super bad" about the economy along with his plans to cut Tesla's workforce flies in the face of what Nio said earlier this week. Tesla, in fact, should be increasing its level of employment with two new factories just having started up. And its Shanghai plant should also be ramping back up from its production drop from the COVID-19 situation.
NYSE: NIO
Key Data Points
If Musk is right in his plans to throttle back, other EV makers like Nio will also be directly impacted. Some investors today aren't waiting to find out if the eccentric billionaire is on the mark with his prediction.
