In the rapidly evolving world of electric vehicles (EVs), 2023 has been a tumultuous year for many emerging EV startups. While macroeconomic challenges have played a significant role, the industry leader Tesla (NASDAQ: TSLA) has intensified the struggle with a price war.
With a series of aggressive price cuts over the past few months, Tesla has sent shockwaves throughout the market, creating additional hurdles for its competitors to navigate.
One of the EV startups that notably felt the effects of these headwinds is the Chinese automaker Nio (NYSE: NIO), which saw its share price plummet over 17% in the past seven days. At the time of writing, on June 27, Nio’s US-listed shares were standing at $8.40, down 0.36% in the previous 24 hours.
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On the weekly chart, NIO’s stock price fell by 17.24% from $9.33. Over that period, the automaker’s market cap plunged by $56 million to $13.14 billion at press time.
NIO is currently experiencing a notable support level at $8.30. This area signifies a price point at which the stock has historically found significant buying interest, potentially indicating a floor for the stock’s decline. On the upside, NIO faces a resistance level of $8.59, representing a price level at which NIO has previously encountered selling pressure.
EV price war bears hard upon Nio
The Chinese electric vehicle market, known as the world’s largest, is currently witnessing an intense and fiercely competitive price war, in which Nio finds itself significantly embroiled.
The company, once called China’s ‘Tesla killer,’ saw its sales decline significantly in recent months, forcing Nio to trim prices, reduce investments, and burn more cash. The company’s monthly deliveries in April and May fell to around 6,000 vehicles from over 10,000 in previous months. Nio was also slow to launch new models to freshen its aging EV lineup, which grew less attractive to buyers.
This month, Nio’s CEO, William Li, said that the company must cautiously manage liquidity risks as tumbling sales continue to weigh on its operating cash flow. Moreover, Nio was one of the slowest EV companies to respond to Tesla’s price cuts, which has put extreme pressure on smaller players in the industry.
Nio reported total deliveries for Q1 2023, which rose 20.5% year-over-year, but declined by 22.5% on a sequential basis. Vehicle margin stood at 5.1% in the first quarter of 2023, marking a steep drop from 18.1% in the year-ago period. The company also issued a soft Q2 guidance, saying it expects revenue in the range of $1.27 billion to $1.36 billion, representing a decrease of between 15.1% and 9%, respectively.
On a more positive note, Nio last week struck a major deal with an Abu Dhabi state-backed entity, which will invest roughly $740 million in the Chinese carmaker. The company also rolled out a new SUV, which is expected to drive sales recovery, according to Li. A portion of this investment will be used to acquire 25% of Tencent’s stake in Nio.
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