Is Nio running out of juice
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Nio: Lights out!
Nio (NIO), a Chinese manufacturer of electric vehicles, revised its forecast for fourth-quarter deliveries downward and blamed supply-chain problems brought on by the recent Covid outbreaks. On Tuesday, the company saw a greater than 8% decline in its stock.
Downturn
In contrast to its previous estimate of 43,000 to 48,000 vehicles, Nio now anticipates delivering between 38,500 and 39,500 electric vehicles in the fourth quarter of 2022.
The business attributed the slowdown in operations in December to supply chain difficulties brought on by Covid outbreaks in significant Chinese cities. Customers of Nio have consequently experienced delivery delays and registration problems. The business declared its intention to reduce client wait times in November.
Nio's third quarter had good production and sales while incurring losses. The company forecasted ongoing strong demand for its new models and recorded a 33% rise in revenue over the prior year, which also happened to be below consensus estimates.
The EC7 and ES8 are two new electric SUV models that Nio introduced last week. According to the corporation, the new models will begin shipping in May and June. The launch coincides with a downturn in the EV market and a rise in support for more affordable Chinese-made vehicles.
According to William Li, co-founder and CEO, the EV manufacturer also noticed a strong demand for its recently introduced ET5 car, which is anticipated to significantly contribute to the company's revenue growth in the fourth quarter.
What does the future hold?
Due to greater delivery volumes and battery costs, the company's Q3 cost of sales grew by 26% compared to Q2 2022 and by 44% on an annual basis. Spending on research & development increased 37% sequentially and more than doubled from the previous year. Simultaneously, selling, general, and administrative costs went up by 49% and 19%, respectively, from the prior year and the prior quarter.
The company's gross margin in the third quarter was 13.3%, up from the 13% it recorded in the second quarter but down from 20.3% in the same period last year. According to Nio, the decline in the annual margin was caused by lower sales of regulatory credits, rising expenditures, and more investment in the company's charging and service networks.
Production, transportation, and delivery in China were first hindered by the country's tight adherence to its zero-Covid policy. However, after the government reversed course, a significant rise in infections forced Nio to miss its yearly delivery goal of 150,000 units.
Together with suppliers, Nio wants to put up a system that would allow for the disclosure of staffing, equipment investment, production capacity, and inventory conditions for semiconductors and raw materials.
By keeping extra parts on hand, placing larger orders with the original chipmakers, and trading semiconductors with other automakers, Nio has put precautionary measures. Nio intends to release its first mass-market model in 2024 after previously focusing on premium buyers for its vehicles. The business is also concentrating on creating its own chips and batteries.
Are these measures enough to satisfy investors?
Market Reaction
NIO ended at $9.80, down 2.58%.
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