In the previous part of this series, we began our discussion by looking at the solid stock gains for Chinese electric carmaker NIO (NIO). On February 26, its stock posted a high for the day of $10.63, which was its highest level since October 2018. Interestingly, NIO posted its all-time high of $13.80 within a few days after it started trading on NYSE in September 2018. However, these sharp gains preceded a massive sell-off in the second half of September, and since then its stock price has seen a roller coaster ride.
Chinese electric vehicle sales
Over the last few months, investors’ fears about slowing Chinese economy have taken a toll on broader-market sentiment. Many macroeconomic indicators have also confirmed this slowdown, which includes the country’s falling vehicle sales.
In January, Chinese vehicle sales fell 15.8% YoY (year-over-year), according to data compiled by MarkLines. This was the eighth month in a row when China reported a decline in its new vehicle sales.
On the positive side, new energy vehicle sales rose 138% YoY in January, which was mainly boosted by a solid ~180% increase in electric vehicle sales.
Great news for NIO?
China is the world’s largest auto market, including for electric vehicles. So NIO has a massive growth opportunity in its home market without having to focus on other countries for sales growth. A 180% increase in January’s electric vehicle sales in China could indicate solid 2019, which is great news for NIO.
China’s huge consumer market is also the reason for investors’ high expectations from Chinese companies such as Tencent Holdings (TCEHY), Baidu (BIDU), Alibaba (BABA), Tencent Music (TME), HUYA (HUYA), Bilibili (BILI), Uxin (UXIN) and Weibo (WB).
Auto companies General Motors (GM), Ford (F), Tesla (TSLA), Toyota (TM), and Honda (HMC) have also raised their bets on China lately. However, in the last couple of quarters, GM, Ford, and TSLA have faced headwinds in China due to steep tariffs.
Read on to the next part of this series, where we find out whether Citron Research was right about NIO.