Nio Stock Forecast: NIO pulls back after conquering $11 level

• Nio stock has overtaken the March 30 range high.
• Last week’s EV price war truce came apart on Saturday.
• NIO stock closed up 7.9% on Monday.
• Consultancy AlixPartners says 2023 will see Chinese brands sell more than half of all new models in the country for the first time.

UPDATE: Nio stock lost 1.8% in the first half hour on Tuesday after opening up as much as 2.5% higher at $11.05. The NASDAQ Composite is slightly lower at the same time due to news that the company will reduce the share of megacap stocks in its NASDAQ 100 index. Much of the positive year-to-date performance was due to the seven largest megacap stocks that include Amazon (AMZN), Apple (AAPL), Nvidia (NVDA) and Meta Platforms (META).

Nio (NIO), the Chinese electric vehicle (EV) upstart, is certainly making a go of it this week. Nio stock leapt 7.9% on Monday to close at a five-month high. Now shares are bumping up against the $11 price tag in Tuesday’s premarket.

The stock has been gathering steam following a price-war truce signed between 16 auto manufacturers in China last Thursday. Despite that truce falling apart over the weekend, investors still seem intent on boosting their stakes in this fallen EV company.

Nio stock has advanced 2.5% in Tuesday’s premarket to $11.05, while S&P 500, NASDAQ 100 and Dow futures are all about 0.15% ahead at the time of writing.

Nio stock news: The tale of a broken truce

On Thursday, July 6, the China Association of Auto Manufacturers (CAAM) welcomed a truce among 16 major automotive manufacturers in China to halt the unrelenting price war that has gone on since Tesla (TSLA) began cutting prices at the end of 2022. 

Besides Tesla, XPeng (XPEV), BYD (BYDDY) and Nio, among a host of others, all signed the truce. By Saturday, however,  just two days later, the truce had already come undone. CAAM announced that it was retracting the truce since the agreement was in violation of China’s antitrust statutes. 

This agreement’s failure may have been spurred on by the fact that Tesla introduced a $500 referral fee to gain customers globally, including in China, and the Volkswagen (VWAGY) joint venture with SAIC also announced price cuts to its EV lineup on Friday. Volkswagen was not a party to the initial truce, but that seems to have been enough to result in complaints from the original parties to the agreement.

A recent report by consultancy AlixPartners says that 2023 is the first year where Chinese brands will likely sell a majority of the vehicles in the world’s largest market for vehicles. A total of 167 companies are legally registered to produce EVs in China, a number that AlixPartners says will need to slim down in order to create a more healthy industry. The report predicts that only 25 to 30 companies will survive to the end of the decade at the current level of competition.

The renewed interest in Nio is somewhat puzzling since the manufacturer saw a drop in sales during its just-finished second quarter. Nio delivered 23,520 units in Q2, which amounted to a 24% decline from the first quarter and a 6% drop YoY. This poor showing came as Tesla, BYD and Li Auto (LI) all experienced quite healthy YoY growth. 

Most analysts believe deliveries will pick up for Nio in the second half of the year, but it would be a stretch for the carmaker to reach its full-year goal of selling 250,000 units. As recently as March, Chief Financial Officer Steven Feng reiterated the quarter-million sales guidance.

A lot of pressure will be placed on Nio’s new ES8 flagship SUV model that was released in late June, as well as updates to past models like the ET5 Touring sedan.