What happened
Shares of many China-based companies are plunging Monday amid renewed fears of COVID-19-related lockdowns in the country. That included the stock of electric vehicle (EV) maker Nio (NIO -3.16%), which dropped as much as 7.6% early Monday morning. As of 10:25 a.m. ET, Nio's American depositary shares were still down 5.3%.
So what
When it reported third-quarter results earlier this month, Nio provided encouraging estimates for its fourth-quarter vehicle deliveries. But China's first reported COVID-19 deaths in six months and rising case counts have investors concerned about how Chinese leaders will work to stem the spread of the latest outbreak. Three deaths were attributed to the virus in Beijing over the weekend, and the southern port city of Guangzhou has already ordered a five-day lockdown of its most populous district.
Image source: Nio.
Now what
Nio shares jumped after the company reported third-quarter results on Nov. 10, predicting fourth-quarter deliveries of as many as 48,000 vehicles. That's compared to 31,607 in the third quarter, and implies a significant acceleration of sales in November and December.
Investors fear that rising COVID-19 cases in China now increase the risk that Nio will again be impacted by the strict policies used to contain those cases. Nio and other EV makers in the country have already had to face production delays, supply chain challenges, and sagging consumer demand caused by prior restrictions including city lockdowns.
Nio seemed ready to make up for those missed deliveries in the fourth quarter. The new cases and lockdown in Guangzhou -- a city of nearly 19 million people -- could result in Nio missing its latest delivery estimates. That in turn will push back any progress toward profitability, causing investors to sell today.
