Stock Market

NIO Stock Looks Ready to Idle

Are you a strong believer in China-based electric vehicle (EV) manufacturer Nio (NYSE:NIO)? If so, be careful, as NIO stock could get stuck in the mud for a while. As rival EV maker Tesla (NASDAQ:TSLA) implements a savvy strategy to stay competitive, Nio and its shareholders could get left behind.

By now, you may have heard about the U.S. government enacting tax credits for certain EV manufacturers, including Tesla. It’s even been said that Tesla CEO Elon Musk may have influenced the government’s decision to implement these tax incentives.

What about Nio, though? Is Nio’s management being proactive in taking steps to compete with a giant company like Tesla? Unfortunately, investors may be disappointed to learn that Nio’s president isn’t willing to emulate Tesla’s price-reduction strategy.

What’s Happening With NIO Stock?

NIO stock has been stuck in a frustrating range since late October and can’t seem to stay above $12 lately. Will there be a massive breakout that Nio’s fans have been hoping to see?

I wouldn’t hold my breath. For one thing, Nio’s 8,506 vehicle deliveries in January 2023 compares unfavorably to the 9,652 from January 2022 and the 15,815 from December 2022.

Meanwhile, Nio’s trying to branch out into the ultra-competitive smartphone business. According to GizmoChina, reactions to the upcoming smartphone, known as the NIO Phone, have been “mixed.”

Actually, “mixed” might be too generous of a word here. GizmoChina observed comments that the NIO Phone is “ugly” and “lacks originality.” Nio’s tweeted picture of the smartphone certainly doesn’t show anything visually impressive. This isn’t a great start if Nio really wants to make a splash in the highly competitive smartphone market.

Nio’s Management Isn’t Flexible on EV Pricing

Speaking of being competitive, Tesla’s EV price cuts could represent the smartest move the company has made in a while. Wedbush analyst Dan Ives commented:

“We believe all together these price cuts could spur demand/deliveries by 12%-15% globally in 2023 and shows Tesla and Musk are going on the ‘offensive’ to spur demand in a softening backdrop.”

I concur with this assessment. So, is Nio planning similar vehicle price reductions? Apparently, the answer is no. The South China Morning Post reported that Nio President Qin Lihong is not currently prepared to have his company implement EV price reductions.

“For a premium brand, offering discounts to chase a rise in sales volume is not an ideal solution,” Lihong explained. I tend to disagree with this. Tesla’s EVs are just as “premium” as Nio’s, and Musk is fully prepared to enact price cuts in order to sell more vehicles during this time of economic challenges.

What You Can Do Now

There are some issues that Nio should resolve in the near future. The company’s smartphone doesn’t seem particularly impressive or eye-catching. Also, Nio’s management apparently isn’t willing to be flexible on the company’s EV prices.

Therefore, don’t expect NIO stock to stage a rally anytime soon. It will be frustrating to see Nio’s share price stuck in idle, so it may be time for EV market investors to consider other stocks.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.