Chinese Electric Car Maker NIO Plunges Most Since Its IPO

(Bloomberg) -- NIO Inc. plunged the most on record after the Chinese electric-vehicle maker lowered its first-quarter delivery outlook and canceled its plan to build a manufacturing plant in Shanghai.

The shares fell 21 percent in New York on Wednesday after rising 62 percent through Tuesday since the initial public offering in September. The stock dropped to $8.01, the lowest since Feb. 21.

NIO, vying to be China’s answer to Tesla Inc., said deliveries of its ES8 SUV tumbled more than expected in February. It’s more evidence of deteriorating demand in the world’s largest car market, which contracted for the first time in two decades last year as the economy slowed and a trade war weighed on consumer spending.

The guidance cut prompted at least one analyst to downgrade the stock. BofAML analyst Ming Hsun Lee lowered his rating on NIO to underperform from neutral, noting lower-than-expected sales growth for the ES8 and a “rich valuation."

While Tesla has recently lowered prices for its cars, Lee noted that NIO does not have plans to do the same. However, the analyst believes the company would have to eventually offer some discounts.

“We believe NIO would have to offer some incentives or more features on ES6/ES8, amid peers’ new product launch/price discount, and the electric vehicle purchase subsidy cut later this year,” Lee said.

Tesla has also repeatedly struggled with meeting delivery targets in the past. The company has recently started delivering its Model 3 sedans in China, a market that’s leading the charge in getting buyers to give up gas guzzlers and go electric.

NIO’s lackluster guidance flagged a key issue that has also dogged Tesla in recent months. Bernstein’s Robin Zhu noted that while NIO’s fourth-quarter numbers were on the soft side, its demand concerns may actually prove more damaging for investors’ long-term outlook on the company. NIO’s fourth-quarter release pointed to February deliveries of just 811 units, Zhu said, adding that lower capacity utilization is expected to weigh on gross margins in the first quarter.

©2019 Bloomberg L.P.