After sharp declines over the past two days, shares of New (New 4.93% ) It was up this morning and up 5.3% at 11:10 AM ET.
Investors believe concerns about Nio’s decision to halt production may have been exaggerated, even as they were reminded of a popular investor’s interest in the electric vehicle (EV) stock.
Nio’s stock fell Monday morning after website CnEVPost reported that the company halted production after several supply partners were forced to close operations amid the COVID-19 lockdowns in China. The automaker also said a production suspension would now mean a delay in deliveries of its cars, which will likely include its flagship, the ET7. Nio began delivering ET7 on March 28.
This morning, though, Nomura Analyst Martin Heung tried to allay investor fears by saying that Nio’s production lines are still operating on weekends to a limited extent, and that the announced halt to production was limited to weekends only. Hyung said this based on his conversations with the company’s management, according to TheFly.com.
This is a very important development given the way Nio shares collapsed on Monday, the market appears to believe the automaker has shut down production entirely until further notice. This would have jeopardized its 2022 plans, but that may not be the case yet if the company is still making cars.
Also, Hyung said Nio is confident to start production at its second plant under construction in NeoPark in the third quarter, provided the pandemic shutdown does not spread outside Shanghai. That city was under complete lockdown, and it didn’t just affect local businesses like Nio, whose headquarters are in the financial centre. The giant factory in Shanghai Tesla (TSLA 3.59% ) It has been closed since March 28.
Nio may have halted production and its shares may have tumbled recently, but long-term investors were not deterred. ARK Invest’s Cathy Wood reminded the market of its interest in Nio in an interview with Yahoo! finance today.
Wood believes that the Chinese government’s focus on “shared prosperity” in an effort to close the wealth gap means that high-margin companies like Tesla will likely be on the government’s radar. So Wood is looking into low-margin companies like Nio that are helping to increase access to transportation in China. Wood also liked Nio’s designs.
Wood first bought Nio shares in the ARK Invest fund on March 25 while selling some Tesla shares at the same time. Her interview today, along with the big reveal about Nomura, has reignited the spark for Nio’s stock.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.