NIO Stock Is Cratering Because Manchin’s Latest Move Means More Than a New Model
The U.S.-listed Chinese electric-vehicle maker
NIO (ticker: NIO) is offering a mid-size luxury sedan called the ET5 that starts as low as $40,000 if buyers take the so-called battery-subscription option. That lets car buyers essentially take $10,000 off the purchase price, in exchange for a monthly fee. It’s a little like paying for gasoline in a traditional car.
The new model should hit the roads in 2022, marking a quick turnaround for the new model from announcement to sales. NIO also said Saturday that its ET7 sedan will begin shipping in March 2022.
Based on Monday’s move in the stock, investors might assume investors were disappointed. Shares were off about 6.7% at $27.99 on Monday morning, while the
Dow Jones Industrial Average
fell by about 1.9% and 1.8%, respectively.
The real factor behind the move is Sen. Joe Manchin‘s decision, which he revealed Sunday, not to support President Joe Biden’s Build Back Better bill, derailing hopes for its passage. That legislation includes purchase-tax credits that would have benefited all electric-vehicle makers.
NIO, with its focus on China, doesn’t sell in the U.S. so a tax credit for buyers in this country wouldn’t help it much. But the entire EV sector was getting hammered Monday. And the valuations of all U.S.-listed EV stocks matter a lot, relative to one another.
stock (TSLA) was down about 3.9% and
(LCID) shares fell 5.9% in response to the Manchin news.
Wall Street actually liked what it heard from NIO. Morgan Stanley analyst Tim Hsiao was encouraged by what he heard Saturday, calling the event a success in a research report. He rates shares Buy and has a $66 price target for the stock. Bank of America analyst Ming Hsun Lee also rates NIO at Buy, with a $65 price target.
Lee wrote Monday that the specifications for the ET5 stand out among its peers. The ET5 will have up to 500 horsepower, 600-plus miles of per-charge range, and come with advanced driver-assistance features running on a computer powered by
Citigroup analyst Jeff Chung noted in a Sunday report that the advanced driver- assistance functions will be available with a monthly subscription fee of about $100. Many car companies are trying to generate subscription-type sales by offering features that are upgradeable with over-the-air software updates. NAD fits that description.
Chung also rates the shares at Buy. His target for the price is $87.
It is hard to find a bearish analyst who covers NIO stock. About 84% of analysts tracking the company rate the shares at Buy, while the average Buy-rating ratio for stocks in the
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