- Nio, widely seen as the Tesla of China, on Tuesday cut its delivery guidance and canceled its plans to build a manufacturing plant in Shanghai.
- Shares tanked 20% Wednesday, and were on track for their worst trading day since going public in September of 2018.
- The guidance cut prompted analyst Ming Hsun Lee at Bank of America to downgrade the stock and cut his price target.
- Watch Nio trade live.
Nio, widely seen as the Tesla of China, crashed 20% to $US8.12 a share Wednesday after cutting its delivery guidance and cancelling plans to build a manufacturing plant in Shanghai. Shares were on track for their worst trading day since going public in September of 2018.
The electric-car maker said it expects first-quarter deliveries of the ES8 – its first volume-manufactured vehicle – to be between 3,500 and 3,800 vehicles, representing a drop of between 52.4% and 56.1% from the prior quarter.
Nio also said it has agreed with the local government to terminate its plan for building a manufacturing plant in Shanghai. It signed framework agreements with the authorities for the plant in 2017.
“We expect a greater than anticipated sequential decrease in deliveries in the first quarter 2019, partially due to accelerated deliveries made at the end of last year in anticipation of EV subsidy reductions in China in 2019, as well as the seasonal slowdowns surrounding the January 1st and Chinese New Year holidays,” said CFO Louis Hsieh in a press release.
“We also expect deliveries in the second quarter 2019 to reflect continued weakness as we await the results of the 2019 EV subsidy policy in China and improvement in the macro-economic conditions.”
The guidance cut prompted analyst Ming Hsun Lee at Bank of America Merrill Lynch to downgrade the stock from “neutral” to “underperform”. The firm cut its price target from $US8 to $US6.80 – 17% below where shares were trading Wednesday.
The company’s “orders backlog seems to be lower than our previous expectation, and Tesla’s recent price cut on Model 3 to secure more share in the premium EV market” could increase competition, Lee in a note seen by Bloomberg.
“NIO still needs to build more NIO House (point of sales), battery swap stations/charging stations and charging trucks, and it has to spend significantly on marketing to sustain brand equity,” Lee said, adding that “if there is a slowdown in volume sales growth, NIO will need more cash to finance its working capital and capex plan.”
Elsewhere, China Development Bank’s board approved the sale of 4.67 million American depository shares of NIO, representing about 0.44% of NIO issued share capital, at a price no lower than $US7.15 per share, Bloomberg reported on Wednesday.
Nio was up 21% since going public in September.
Read more stories on Nio:
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- The Tesla of China slips below its IPO price
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- The Tesla of China surges after deliveries beat
- The Tesla of China spikes as short seller Andrew Left sees ‘little resistance’ for Nio to surge 60%
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