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Nio stock soars as China grants carmaker status

Nio stock soars as China grants carmaker status

The year 2023 has proven to be a formidable challenge for Nio (NYSE: NIO) investors, as the electric vehicle (EV) company grapples with a series of setbacks. 

Amid global concerns about EV demand and intensifying competition, Nio’s stock has remained deeply in the red. Particularly impactful were Nio’s price cuts, leading to a significant drop in gross margins. 

However, on December 4, Nio and its investors received a piece of good news after reports revealed that China added the company to the list of approved car manufacturers, sending its shares rising at the market open.

While its Hong Kong-listed shares closed 2% lower at 55.35 HKD, Nio’s US-listed stock climbed 2.46% at the US market open to $7.33.

What happened?

According to the Chinese industry ministry’s website, Nio has been included in its database of companies permitted to manufacture vehicles in the country, marking a significant milestone for the EV startup. 

The website did not reveal details about whether or when a manufacturing license was granted to Nio, which has been producing electric cars on a contract basis since 2018, in partnership with Anhui Jianghuai Automobile Group (JAC). 

The approval represents an important development for Nio because it would address some uncertainty over the impact on the automaker of JAC’s plans to offload some assets belonging to the two factories that produce Nio EVs.

Earlier this year, a state-backed news outlet China Securities Journal reported about JAC’s plans. At the time, Nio said such a move would not affect its future production. 

Bestowing a production license upon Nio signifies a notable shift in the stance of Chinese authorities, who have so far exercised caution in approving new production licenses due to concerns about overcapacity and an escalating price war involving more than 40 brands. 

Notably, Tesla Inc (NASDAQ: TSLA) has encountered hurdles in securing regulatory approval for its Shanghai plant expansion plan, while luxury EV maker Lucid Group (NASDAQ: LCID) has reportedly been cautioned about the slim probability of winning its own manufacturing license in China.

Nio stock chart analysis

Over the past month, NIO remains down around 9.8% and over 25% year-to-date.

NIO 1-day price chart. Source: Finbold

Now, the carmaker’s shares face a near-term resistance zone between $7.84 and $8.20. Clearing this area would allow NIO to attack a confluence resistance formed by 200-day and 100-day moving averages (MAs), located at $9.28 and $9.71, respectively. 

On the downside, the stock is propped up by a strong support line at around $7. NIO hasn’t fallen below this threshold since June 2020. 

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