What happened
The American depositary shares of China-based Nio (NIO 8.72%) were plummeting Wednesday morning. Shares dropped as much as 9% and remained down 8.1% as of 11 a.m. ET. Two news items out of China have investors in the electric vehicle (EV) company selling today.
So what
First, Nio and its EV peers in China have been negatively impacted by lockdowns driven by China's "zero-COVID" policy. The company seemed to imply that headwind was behind it now, as it estimated deliveries for the fourth quarter would increase between 36% and 52% over the third quarter. But China just locked down Peking University in Beijing due to a single COVID-19 case, the Associated Press reported today, demonstrating that the strict policy continues to be enforced.
Those lockdowns haven't just impacted production. Consumer demand has also taken a hit, and another report today implies that automakers in China are still struggling to bring customers back into the market.
Image source: Nio.
Second, as Mercedes-Benz Group works to expand its EV lineup in China, it has now lowered prices as much as the equivalent of almost $34,000 for its high-end model, reports Barron's. The automaker is reportedly dropping the price of its EQS to about $136,000 from $170,000. But even the lower-priced EQE model is being reduced by more than 9% to $68,000.
Now what
Nio has reported expanding losses, and it needs to boost production to move closer to profitability. If new restrictions related to COVID-19 affect production and delivery once again in the fourth quarter, it will undoubtedly cause the company to reduce its guidance.
Whether that's what is prompting Mercedes-Benz to lower prices or not, that is still competition at the luxury end of the market for Nio. It seems investors see both news items as reasons to sell the stock today.
