What happened
Nio (NIO +3.76%) stock spiked Monday morning, but it didn't take long for it to reverse course. The volatility shows just how dynamic the economic situation is in China. Shares of the Chinese EV maker jumped nearly 7% after the market opened, but by 12:40 p.m. ET, Nio stock was down by 1.6%.
NYSE: NIO
Key Data Points
So what
The initial pop came as China loosened COVID-19 restrictions in several large cities over the weekend. Even with coronavirus cases hovering near record highs, Chinese leadership seems to be reacting to protests from its citizens, with Beijing and Shenzhen the latest cities to roll back testing requirements.
The stock reversed those gains, however, likely in reaction to reports that could indicate a drop in demand for EVs in the country. Reuters reported that after record November deliveries, Tesla (TSLA +3.87%) has plans to cut production of its Model Y by 20% at its factory in Shanghai.
Image source: Nio.
Now what
Tesla delivered a monthly record 100,291 vehicles from its Chinese factory in November. But recently rising COVID-19 cases have prompted more restrictions on citizens' mobility. Previous city lockdowns this year have impacted consumer demand, so investors seem to be fearing that would reoccur.
A Tesla representative seemed to indicate the report was not accurate, however, without elaborating regarding production plans or demand, according to the report. A separate report from CNBC said that lockdowns related to COVID-19 have led to a 40% reduction of U.S. manufacturing orders in China. That's another indication of the impacts on manufacturing operations and logistics services from the tight restrictions.
Investors are counting on Nio reporting a sharp increase in production output in the fourth quarter. The stock will likely continue to move with the news coming out of China in the near future. News of easing restrictions led to a spike in the stock, but investors aren't sure whether impacts of those restrictions have already caused a drop in orders. Expect the stock to remain volatile until Nio releases its December delivery data next month.
