NIO - return to the limelight?
The year so far has not been a miraculous one for the Chinese carmaker NIO, with the shares rising by less than 4%. In the last 12 months, it has even weakened by more than 50%. However, June 2023 has been very positive for NIO, with the stock gaining 18%. This begs the question, is NIO poised for a return to the limelight? First, let's answer why NIO has not done so well this year.
NIO did not do well this year at first - why?
For example, the stock of competitor Tesla is up 150% since the beginning of the year. And when it comes to NIO’s failure, Tesla is to blame. The Californian carmaker's multiple price cuts have made its cars very attractive, and this has had an impact on demand for NIO cars. Moreover, a question mark hangs over the strength of the Chinese economy, which has not taken off in the way that was expected after the coronavirus. The industry has been limping along for several months in a row and demand is generally weaker than expected. This is not good news for premium car dealers.
NIO shares in the MT4 platform on the H1 timeframe along with the 50 and 100 day moving averages
The first-quarter results were not miraculous, but the stock rose. NIO's quarter-on-quarter sales fell 33% and new car deliveries fell 22%. In addition, margins plunged horribly year-over-year from 14.6% to 1.5%.
June 2023 - the turning point
However, NIO shares were able to grow on the back of a year-on-year increase in sales and new car deliveries, as well as a smaller loss compared to the previous quarter. In addition, the company took inspiration from Tesla and last month announced a 6-9% price cut on all of its cars. In addition, NIO has launched 4 new models in recent months. These should be available not only in Asia but also in Europe. NIO is thus significantly increasing the number of cars delivered.
Moreover, the carmaker was noticed by an Abu Dhabi investment fund, which invested $740 million in NIO. Thus, the price bottom in NIO's shares may have already been established and it is possible that the stock is looking at a better tomorrow. However, the current situation in China, which also has the lowest inflation in the world, is still alarming. Year-on-year inflation for June even reached 0.0%. Further monetary easing in China may thus become a reality very soon. A possible higher interest rate cut could support Chinese demand and also NIO shares. On the positive side, the chapter around Ant Group, which has been prosecuted by Chinese regulators, should hopefully finally be closed. Ant Group was fined $1 billion, but after the announcement Chinese stocks reacted by rising.