Nio revised delivery estimates. Is Stock Sale Time?

After reducing first-quarter delivery projections, Chinese electric vehicle (EV) maker Nio (NYSE: NIO) saw a 7% drop in American depositary shares on Wednesday morning.

Nio had earlier informed investors that it planned to supply up to 33,000 automobiles throughout the quarter. Presently, it anticipates just around 30,000 units to be shipped. Investors' already low expectations for Nio's future were heightened by the revelation. Shares of Nio have fallen by nearly half so far this year alone.

Is there a glut in the market for electric vehicles? Electric vehicle sales are highest in China. Nio continues to put its faith in its local market to fuel its rapid expansion into Europe. Together, the United States, Europe, and China sold about 9 million battery-electric vehicles last year. 

China accounted for about two-thirds of those. However, growth has been declining, therefore car companies are reducing prices to keep expansion going.

In 2024, growth slowed down since many early adopters had already bought cars. Since reaching a peak in July of last year, Nio's monthly unit volume sales have declined significantly.

Whether investors anticipate a long-term shift to electrify transportation or see the current pattern of slower growth as purely transitory is a question for them to answer.

According to Jeff Chung, an analyst at Citigroup, electric vehicles will account for around 27% of China's new vehicle sales in 2024. In the United States, only around 8% of vehicles sold are completely electric, indicating a far lower penetration rate.

It may be prudent to invest in Nio and other electric vehicle manufacturers if one thinks the adoption runway is still somewhat long. However, you should consider the potential consequences of being incorrect when deciding how much to risk in a new industry that is still developing.

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