Why Nio Stock fell today

What happened

After launching the first trading day of 2022 on a strong note, electric vehicle (EV) stock Nio (NYSE: NIO) reversed course on Tuesday and fell 5.4% by 1:30 p.m. ET. An analyst sees Nio stock doubling in 2022, but even that doesn’t appear to have sparked investor interest.

So what

German bank Analyst Edison Yu issued a bullish note on Nio on Jan.4, predicting that the electric vehicle maker’s stock would rebound sharply this year after a 2021 failure, mostly supported by new product launches. To name a few, Nio plans to begin deliveries of its flagship ET7 sedan in March and its all-new ET5 midsize sedan in September. Nio is also expected to unveil a sixth model this year and has aggressive plans to expand internationally, particularly in Europe.

Image source: Nio.

Yu believes these growth catalysts could take Nio shares to $ 70 apiece over the next 12 months, which implies a 109% rise from the share’s closing price on Jan. 3. So why haven’t Nio stocks taken off despite analysts’ huge price target? You might want to blame You’re here (NASDAQ: TSLA), at least partially.

Tesla just released massive fourth quarter delivery figures while Nio pulled it off just about Sales up 50% year-on-year in December. On the one hand, Tesla’s exceptional sales reflect strong demand for electric vehicles. On the other hand, Tesla’s rise to power is a direct threat to Nio, who is himself often referred to as the “Tesla of China”.

In addition, China cut subsidies for electric vehicles by 30% from January 1, which could undermine what has so far been one of the biggest competitive advantages for local electric vehicle manufacturers over domestic electric vehicle manufacturers. foreign companies like Tesla.

It is important to note here that although subsidies in China are available for electric cars sold only below a certain price that does not apply to Nio, customers using battery service as a service (BaaS ) de Nio are eligible for grants. BaaS offers Nio customers the option of saving up to $ 10,000 per car by purchasing cars without batteries and choosing instead to swap and recharge the batteries at Nio’s battery swap stations as needed. In short, lower subsidies could make Nio’s battery swap-compatible cars less attractive compared to their peers in terms of price.

Tesla is also proving to be a formidable competitor outside of China – Tesla has become the best-selling brand in Norway, also the first and only international market that Nio has ventured into so far.

Now what

With most EV inventories tumbling on Tuesday, Nio followed the tide. Investors now also want to see bigger things and bigger numbers of Nio to gauge whether and how quickly he can catch up with Tesla. That could mean higher volatility for Nio shares, but 2022 could potentially be a huge year for the EV stock if Nio starts to execute on his plans.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Vicki Davis

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