What happened
Shares of Nio (NIO 1.04%) jumped by more than 11% to start the new trading week. The stock of the Chinese electric vehicle (EV) maker had gained ground Friday morning after reporting its first-quarter financial update.
Shares lost that early gain Friday, but more news this morning has it popping again. As of 10:32 a.m. ET on Monday, it still held on to a gain of 9.4%.
So what
Today's jump comes as the company announced it was cutting vehicle prices and after it also said it was throttling back on spending. Nio is slashing prices on all models but will no longer offer new buyers free battery swapping services, according to Reuters.
Starting today, all Nio models will cost buyers about $4,200 less, which represents a drop of between about 6% and 9% for its lineup of EVs. Investors weighing the implied drop in revenue from the price cuts against the increased income from its battery-swap services from new customers seem to think it's a net positive for the company.
Now what
Earlier this year, CEO William Li said the company would not follow Tesla's lead in cutting EV prices in China. But first-quarter vehicle deliveries declined by more than 20% sequentially from the fourth quarter of 2022. The company also sees second-quarter deliveries being lower than the prior-year period.
Investors who consider Nio a growth company haven't been happy with that performance. It seems that the new plan to boost sales is the direction investors want the company to go.
The CEO also said during the earnings conference call late last week that the company is throttling back on expenses by delaying some capital expenditures and some research and development (R&D) projects.
Nio's focus on boosting sales and watching spending has the stock rebounding after it has dropped more than 50% over the past year. But competition is growing, and investors might want to wait to see progress before jumping into the stock with today's bounce.
