Do not (NIO) was poised to report third-quarter earnings early Thursday after the Chinese luxury electric vehicle startup recently suspended production due to Covid restrictions. Nio shares fell near a more than two-year low on Wednesday.
Much ahead of NIO’s actual earnings, its fourth-quarter delivery outlook could be important. NIO’s electric vehicle production was disrupted in October by new restrictions due to the coronavirus outbreak in China.
“Looking ahead to 2023, investors are very focused on 2Cs: competition and Covid,” Deutsche Bank analyst Edison Yu said in a NIO earnings preview to investors on Tuesday.
Over the weekend, China denied reports it would ease its ultra-strict “zero-coronavirus” policy, which has hurt manufacturing and consumer confidence.
On Wednesday, the southern manufacturing hub of Guangzhou ordered 5 million of its 13 million citizens to stay home for a week amid a surge in coronavirus cases.
On Tuesday, the Chinese electric vehicle and battery giant BYD BYDDF said it will launch a new premium car brand in early 2023 called Yangwang, which means “looking up”.
estimate: Analysts polled by FactSet expect NIO’s net loss per ADR to widen to 14 cents from 6 cents a year ago. Revenue rose 17% to $1.799 billion.
result: Check back before opening Thursday.
appearance: Wall Street expects NIO to lose 63 cents per share for the full year. Loss of 30 cents in 2021. Revenue is expected to grow by 36.6% in 2022.
NIO stock, Chinese EV stock
NIO shares fell 12.4% to 9.25, extending losses from Monday and Tuesday as stocks fell broadly today. It was the worst close in more than two years. Nio shares closed below their 21-day average on Monday, still well below their long-term average. The once-hot Chinese electric vehicle startup is now more than 75% below its 52-week high.
Among other Chinese EV startups, ideal car (LI) fell 12.4% on Wednesday. Xiaopeng (XPEV) plummeted 14.7%, near an all-time low. BYDDF shares fell 8.3%. Tesla, which dominates China’s premium electric car market, fell 7.2% on Wednesday after hitting a 17-month low on Tuesday.
Electric vehicles under BYD’s new premium brand could be priced between 800,000 yuan ($110,320) and 1.5 million yuan, according to local media reports.
China Covid curbs EV sales
In the third quarter, NIO sold a record 31,607 electric vehicles, beating its start-up rivals Li and Xiaopeng but at the low end of its previous estimates. NIO marks a comeback after falling behind those rivals earlier this year.
NIO again surpassed Xpeng Motors and Xpeng Motors in October, but sales fell year-on-year. September. Nio said Nov. 1 Covid containment measures affected production and deliveries in October.
They also caused the Chinese startup to miss a record electric-vehicle delivery target every month in the fourth quarter.
In pursuit of growth outside of China, NIO officially unveiled the new ET7 and ET5 sedans and the new ES7 SUV in Europe last month.
“We expect a largely decent quarter, with regulatory credit likely to boost overall margins,” Deutsche Bank analyst Yu said in a NIO earnings preview on Tuesday.
But “all eyes will be on the fourth-quarter delivery outlook given the recent Covid-19 outbreak in Hefei that affected production in October,” Yu added.
On Nov. 2, NIO confirmed to Reuters that it had temporarily shut down electric vehicle production at its Hefei plant as cases rose due to Covid-19 restrictions. But local media reported the next day that NIO’s production had resumed.
At the same time, competition in the premium SUV segment is intensifying. Li and Xpeng are bringing more SUV models to the market. Tesla recently cut Model Y prices in China. Now BYD is preparing a new high-end brand.
“While we certainly believe caution is necessary, given NIO’s strong brand, unique ecosystem (battery replacement) and new product portfolio, especially sedans, we don’t think NIO will be vulnerable other than older models ,” Yu added in Tuesday’s report.
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