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Why Shares Of NIO Are Down By 5% Today?

·2 min read

NIO Video 26.03.21.

NIO Is Forced To Temporary Suspend Production Due To Semiconductor Shortage

NIO stock found itself under strong pressure after electric vehicle producer announced that it would temporarily suspend production at its JAC-NIO plant in Hefei for five working days due to semiconductor shortage.

The company also noted that semiconductor shortage has negatively impacted its production volumes in March. In these circumstances, NIO had to change its first-quarter production guidance from 20,000 – 20,500 vehicles to 19,500 vehicles.

The stock market did not like the news, and NIO shares are down by more than 5% in today’s trading. The stock has already lost plenty of ground since early January when it made an attempt to settle above the $67 level as traders took a closer look at valuations of high-flying electric vehicle stocks.

It should be noted that market leader, Tesla, declined from $900 to the current levels near $635 within the same time frame, so NIO shares are clearly suffering from a sector-wide sell-off.

What’s Next For NIO?

Demand for chips surged during coronavirus pandemic as people were forced to work from home. A the same time, electric vehicle industry continued to grow at a fast pace, which also boosted demand for semiconductors.

Most likely, the semiconductor shortage problem will not be solved in the next few months as semiconductor producers need time to invest in new production lines before they will be ready to operate at higher capacity. This is the problem faced by the whole auto industry, and NIO is not an exception.

In the longer run, the problem will get solved, so the key question is whether investors are ready to take the long-term view at current price levels. NIO capitalization was cut in half compared to the highs reached in early January, so the stock has a decent chance to attract opportunistic traders who are willing to bet on the continued growth of the electric vehicle industry.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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