October 19, 2021

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Unlimited Technology

Why Nio Stock Jumped Wednesday

What happened

Shares of Chinese electric vehicle maker Nio (NYSE:NIO) have had positive momentum for more than a week now, and that has continued today. As of 11 a.m. EDT, Nio shares had gained 3%. Since Oct. 4, the stock is up more than 9%. There are both company-specific as well as more general reasons related to its business that help explain the move. 

So what

Last week, Chinese electric vehicle and battery maker BYD, which is one of Warren Buffett’s Berkshire Hathaway portfolio holdings, announced plans to collaborate with a fleet-as-a-service solutions joint venture to deploy up to 5,000 new EVs to fleet managers in the U.S. And yesterday, news came that global EV leader Tesla had produced a record volume of electric vehicles at its Shanghai factory in September, with the majority of those sales remaining in China. Both items bode well for the growth of Nio’s business. 

Nio ES8 electric sedan preparing to be shipped to Norway.

Nio ES8 electric sedan to be shipped to Norway. Image source: Nio.

Now what

According to data from the China Passenger Car Association, Tesla produced a record 56,006 Model 3 and Model Y vehicles in China in September, and only 3,853 were exported. That signals strength in the Chinese EV market that wasn’t apparent the prior month. In August, Tesla’s China facility exported about 71% of the more than 44,000 vehicles it made, according to Reuters. 

A strong domestic market is essential for Nio, though the company has also begun exporting to Europe. Its initial shipment went to Norway earlier this year, and the company has plans to expand its presence there through its Nio House community as well as its Nio Power battery exchange and charging stations. It also plans to be shipping its new ET7 luxury sedan to Germany by the end of next year. 

Competitor BYD already has a presence outside of China, including in the U.S. where it markets its electric buses. But a Chinese EV maker growing its presence in the U.S. might also signal to some that Nio will eventually enter the U.S. market. For now, the company is counting on strong Chinese and European markets, and investors are recognizing that potential and more as the stock holds upward momentum.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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