NIO
Stock Market Analysis

NIO Stock Shakes Off Chip Shortages With Strong Deliveries

Strong deliveries in March helped NIO to shake off chip shortages, so what might this mean going forward for the China-based EV manufacturer? 

The electric vehicle (EV) industry has been heating up in recent years, with traditional automakers and newcomers getting involved. NIO (NYSE: NIO) has garnered a lot of attention as the leading China-based EV company. However, it has been dealing with some recent ups and downs. 

Struggles with chip shortages 

NIO was forced to close one of its factories for five days on March 29 as a result of a global shortage of semiconductors. This caused the company to revise its Q1 delivery estimate from 20,000-20,500 vehicles to 19,500. Despite this revision, NIO’s expected deliveries were still greater than Chinese rivals Li Auto and Xpeng.

The likes of Nissan and Stellantis also had to halt production due to the shortages, while others had to scale back production. Contributing factors to the strain on this supply chain include the COVID-19 pandemic and U.S.-China trade tensions.

With people spending more time at home, the demand for video game consoles and computers skyrocketed. This had a knock-on effect on the supply of semiconductors available to the motor industry. A regular vehicle will use about 1,300 chips, with EVs sometimes needing over 3,500 chips. On the day of NIO’s factory closure announcement, its stock closed down 4.8%. 

Bouncing back 

Despite the chip shortages, NIO ultimately delivered a single-month record7,257 vehicles in March. This was a 373% increase year-on-year (YoY). Total Q1 deliveries reached 20,060 vehicles, surpassing the company’s revised estimate. This was also greater than Xpeng’s 13,340 units and Li Auto’s 12,579 units delivered during the quarter.

It appears that the China-based EV manufacturers are coping better than initially expected with the chip shortages. While the likes of Tesla are eyeing up the Chinese EV market, homegrown brands like NIO appear to have more potential due to their intimate knowledge of the market, providing innovations that are specific to Chinese customers, and their relationships with the central authorities. 

Another recent boost for NIO was the announcement of its first electric sedan, the NIO ET7. It offers completely autonomous driving and will be the fourth vehicle option in the manufacturer’s range. 

The company’s other revenue sources have also been increasing strongly. NIO provides charging stations, warranties, and vehicle internet connection services. It also offers energy packages that include the swapping and charging of batteries, as well as providing maintenance, enhanced data, and repair services. These other revenues rose 184.1% in Q4 2020 up to $71.6 million. 

NIO has set up multiple revenue streams to help drive it forward, rather than mainly relying on new car sales to continually drive up revenue. With the company’s share price dropping over 40% since early February, now could be a good time for investors to get involved with a China-based EV company that has a lot of potential.

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Andrew O'Malley
Andrew O'Malley
Andrew is a contributing writer to MyWallSt. He is a full-time finance writer, having spent time working in the industry. He studied Economics and Finance and has been fascinated with the financial markets since his teens. The first stock that Andrew bought was Apple, reflecting his love for its products.