- NIO bounds 5% higher on falling Treasury yields, soft NFP, cost savings plan.
- Nio CEO William Li says Nio will cut about 10% of its employees.
- Non-core investments will also be trimmed as EV company focuses on financial performance.
- US Nonfarm Payrolls fell to 150K in October, a print that all but ensures rate hikes are over.
Nio (NIO) stock has gained as much as 5% on Friday morning after reporting that increased competition in the Chinese electric vehicle (EV) market had forced the Shanghai-based company to lay off 10% of its workforce and trim some of its investments.
NIO stock has broken above its 21-day Simple Moving Average (SMA) as the automaker said it was considering spinning off some of its segments to streamline the firm and save money.
The US equity market has reacted fondly to a light Nonfarm Payrolls report for October that showed US employment growing at a slower pace that is more in line with the soft landing narrative. The US Federal Reserve is much less likely to raise interest rates with this news.
Additionally, US Treasury yields have collapsed, another boon to equity prices. The 2, 5, 10 and 30-year bonds all saw yields retreat more than 2%, and the 5-year bond saw its yield fall more than 3%.
Nio stock news: CEO says company will focus on efficiency
Nio management seems to have come to terms with the fact that it is not the future EV leader in the Chinese market that it was once thought destined to become. Data from the China Passenger Car Association shows in the year through September Nio was ranked 9th among EV and hybrid sales in mainland China, bagging a little over 2% of market share.
BYD (BYDDY) and, to a lesser extent, Tesla (TSLA) have been locking up a larger share of the market in 2023 as they engage in a hyper competitive price war that has been hurting smaller players like Nio.
Bloomberg obtained a letter sent to employees on Friday explaining that the layoffs were necessary due to mounting profit losses and the company’s struggle with growth.
“This is a tough but necessary decision against the fierce competition. We still have a gap between our overall performance and expectations,” said CEO William Li in a statement to Reuters. The chief executive added that investments that would not make a real difference to the company’s financial performance within three years would also be given the axe.
Nio released October delivery data on Wednesday showing that the EV company delivered 16,074 vehicles in the month, which was a 60% increase from a year ago but just a 3% gain from September. At just 126K deliveries so far in 2023, Nio is a long way away from its goal at the beginning of the year to deliver 250K vehicles.
In mid-October, Nio said it was considering selling through a dealer network in Europe rather than its direct sales model. Reports emerged that the company was hiring extensively in Hungary, France, Switzerland, Austria and Italy.
EV stocks FAQs
Electric vehicles or EVs are automobiles that use rechargable batteries and electric motors to accelerate rather than internal combustion engines (ICEs). They have been around for more that 100 years, but battery technology research & development was meager for much of the 20th century. Lithium-ion battery technology became advanced enough to produce EVs at scale in the late 1990s and 2000s, and sales have been steadily increasing since then Tesla’s Roadster was unveiled in 2008. EVs are viewed as a means of reducing carbon emissions since battery electric vehicles (BEVs) themselves produce zero emissions. Other vehicles called plug-in hybrid electric vehicles (PHEVs) utilize both battery electric power and ICEs as a backup.
EVs are growing from a small base, but they rose from 9% of global new auto sales in 2021 to 14% of the total in 2022. This was a 65% YoY growth rate, and the industry delivered 10.2 million EVs worldwide in 2022. Projections show this number climbing above 16 million in 2023. Across the world, market shares differ greatly among nations. Nearly 88% of Norwegian new car sales in 2022 were EVs. On the other hand, the United States, where much of the modern innovation in EVs was forged, had less than 8% of new vehicle sales go to EVs in 2022. The largest EV market in the world, China, saw 30% of the market go to EVs that year.
We know you’re thinking Elon Musk, but he’s probably more like the father of the mass-market, contemporary EV. All the way back in 1827, a Hungarian priest named Anyos Jedlik invented the electric motor and used it the following year to power a vehicle of sorts. French scientist Gaston Planté invented the lead-acid battery in 1859, and German engineer Andreas Flocken built the first true electric car for the public in 1888. EVs made up about 38% of all vehicles sold in the US around 1900. They began losing market share rapidly after 1910 when gasoline-powered vehicles grew much more affordable. They largely died off until new research programs in the 1990s led to gradual private sector investment in the 2000s.
China’s BYD is by far the largest manufacturer of EVs in the world. In 2022 it sold 1.8 million EVs and in the second half of the year made up 20% of the global market. The asterisk given to BYD is that the vast majority of these vehicles are hybrids. Tesla’s 12% market share is often treated as more significant than BYD, because it only sells BEVs and is the most famous EV brand in the world. Volkswagen, BMW and Wuling then round out the top five. As a new sector with heavy investment though, many startups have flooded the market. These include China’s Nio, Li Auto and Xpeng; a Swedish-Chinese manufacturer called Polestar; and Lucid and Rivian from the US.
Nio stock forecast
The market is happy that Nio is defining a new strategy, but Nio’s layoffs may have little to do with it. Competitors XPeng (XPEV) and Li Auto (LI) have both seen their share prices advance on Friday despite not offering up major new policy changes. The more likely reason is that the equity market is excited about the employment data in the US and the falling Treasury yields. As the value of the US dollar recedes on the news, stock prices advance in compliment.
The more than 5% gain in Nio stock on Friday has a lot going for it. NIO stock only on Wednesday was resting at long-term support near the $7.30s. Its break higher late in the week has sent the share price above the 21-day Simple Moving Average (SMA).
Bulls now have their work cut out for them as the next area of resistance comes more than 10% higher at $9.20. That level served as a double top on September 29 and October 11. From there it’s a straight shot to the resistance band ranging from $10 to $11.30. For this rally to continue, however, the 9-day SMA needs to break above its 21-day counterpart.
NIO daily chart
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