Why Nio Stock Jumped Today

What happened

Nio (NIO 2.93%) shares jumped more than 5% Friday morning and were holding on to a gain of 3% as of 2:33 p.m. ET. That move was a sigh of relief from investors, who finally got some news they’ve been waiting for.

So what

Nio — like other Chinese automakers — has been hit by multiple rounds of business slowdowns due to COVID-19-related shutdowns and drops in consumer demand over the past year. Those issues kept any recovery for Nio stock at bay. But now there are signs that might be ending and electric vehicle (EV) sales are picking back up. The stock is showing renewed signs of life as result. 

Now what

The slump in EV demand has led to vehicle price drops by EV leader Tesla in China that were followed by cuts from other domestic EV makers. Initial data shows those price cuts seem to now be spurring demand. 

Last week, weekly vehicle insurance data showed about 13,000 Tesla vehicles were registered compared to just 2,100 the prior week before price cuts took effect, reports Barron’s. Research performed by Wedbush Securities analyst Dan Ives supported the theory that price reductions have brought a surge in demand. 

Nio electric SUV.

Image source: Nio.

Ives surveyed 500 consumers in mainland China and more than 75% said they were considering buying a Tesla EV in 2023. Nio was the third most popular brand Chinese consumers were considering behind Tesla and the much larger Warren Buffet-backed BYD.  

Nio delivered fewer vehicles in the fourth quarter than it originally expected due to the economic slowdown brought on by COVID-19 impacts. Now that the country is reopening, it’s great news that registrations are picking back up for Tesla. While it is a competitor, what is good for Tesla in China related to demand is also certainly good for Nio. Investors see that today and are bidding shares back up. 

Howard Smith has positions in BYD, Nio, and Tesla. The Motley Fool has positions in and recommends BYD, Nio, and Tesla. The Motley Fool has a disclosure policy.