Nio Stock Price Prediction: The Case For China’s Tesla

The Nio stock price has dropped like a rock in the past few months. The shares are trading at $19.72, which is about 70% from its all-time high. As a result, the company’s market value has dropped to about $32 billion. In addition, other EV stocks like Li Auto, XPeng, Rivian, and Lucid have dropped sharply in the past few months.

The case for Nio

Nio stock price has dropped sharply because of a combination of factors. For example, there are concerns about the company’s margins as the cost of doing business rises. One of the biggest issues is the cost of producing batteries, considering that the price of nickel and other metals has risen. Indeed, Nio’s CEO recently warned about the upcoming battery shortage in the industry. Further, the stock has dropped because of delisting worries in the US and the ongoing Covid crisis in China.

Still, a case can be made for Nio. First, while competition is rising, Nio has a strong market share in China, where it is compared to Tesla. Some of its biggest competitors are firms like Xpeng and Li Auto. Therefore, the firm will continue boosting its deliveries in the country in the coming years. 

Second, Nio is a bit insulated from the ongoing crisis in Ukraine. For one, China has remained neutral, meaning that the company will be able to buy battery components from Russia. The only challenge for this is that Nio still uses American technologies, and it has ambitions to sell its cars in Europe and American markets.

Third, the Nio stock price will likely keep rising because of its strong deliveries. The firm delivered over 9.985 vehicles in March, up by 37.6% year-on-year. This means it has done well even as the cost of doing business has increased. Notably, the company is expanding its NeoPark plant. In a recent note, an analyst at Nomura wrote that:

“The market has widely believed that Nio is undertaking a complete production halt. However, according to Nio management, the halt is limited to weekends only, and production lines will still be running on weekdays.”

Finally, the worries about the delisting of Chinese stocks are likely overblown. There is a likelihood that the regulators will reach an agreement on this. Besides, it is in their mutual benefit to avoid these delistings.

Nio stock price forecast

The Nio share price has bounced back slightly in the past few weeks. On the four-hour chart, we see that the stock has formed what looks like an inverted head and shoulders pattern. In most cases, this pattern is usually a bullish sign. Therefore, there is a likelihood that the shares will continue rising in the near term. This view will be confirmed if the stock moves above the descending neckline shown in red.