What happened
The American depositary shares of Chinese electric vehicle (EV) maker Nio (NIO 3.49%) dropped as much as 5% Thursday. Even after bouncing back slightly, the stock remained lower by 4.2% as of 3:25 p.m. EST.
So what
There has been good news from China's EV sector this week, but investors are realizing that might not necessarily mean good news for Nio. The China Passenger Car Association (CPCA) just released February auto sales numbers, and it was a strong showing for EVs. But investors are thinking that Nio won't be one of the beneficiaries.
Now what
That's especially true based on the company's own first-quarter vehicle-delivery projections. After shipping over 40,000 electric cars in Q4, management doesn't expect to deliver more than 33,000 in Q1. So when the CPCA data showed how much EV sales are outpacing gasoline-powered cars to start 2023, it is particularly disappointing for Nio investors.
Sales of Chinese new energy vehicles -- which include fully electric and plug-in hybrid models -- have jumped 23% over the first two months of 2023. At the same time, internal combustion engine sales dropped 25% versus that same two-month period last year. That would be great news for Nio if it was also seeing growing sequential sales.
Image source: Nio.
But that market is dominated by Tesla and China-based BYD. It seems growth in the China market is being driven by the price cuts initiated by Tesla in early 2023 and by BYD's pivot to battery-powered cars. Investors may know BYD since it's a holding in Berkshire Hathaway's portfolio. Warren Buffett and partner Charlie Munger first invested in the company in 2008. BYD was the global leader in EV sales in 2022 with 1.9 million vehicles sold. That beat even Tesla's 1.3 million deliveries.
Those two companies may be leaving Nio in the dust even when it comes to its own home market. That seems to have investors losing faith in Nio.
