NIO stock was trading higher in early US price action today even as the broader markets are in the red. The company released its deliveries for June which surprised on the upside. Li Auto and Xpeng Motors also reported their June deliveries and were trading higher.
While Tesla releases its delivery report on a quarterly basis, Chinese EV (electric vehicle) companies report deliveries monthly. Analysts have been toning down Tesla’s second-quarter delivery estimates due to the lockdowns in China. In an internal email, Tesla’s CEO Elon Musk also admitted that the second quarter was “tough” for the company.
Coming back to NIO, the company delivered 12,961 cars in June, which was 60.3% higher than the corresponding month last year. It was the best month for NIO since it went public in 2018. In the second quarter, its deliveries rose 14.4% to 25,059. While the company’s production and deliveries took a hit in April and May, they rebounded in June.
China has lifted the lockdowns which have helped support a recovery in its manufacturing activity. China’s Caixin June PMI showed that the manufacturing activity in the world’s second-largest economy expanded at the fastest pace in 13 months.
NIO’s Deliveries Rise But Trail Li Auto and Xpeng Motors
Like NIO, Li Auto and Xpeng Motors also reported an increase in June deliveries. While Li Auto delivered 13,024 cars in the month, Xpeng Motors delivered 15,295 cars in the month. Over the last few months, NIO’s deliveries have trailed that of Li Auto and Xpeng Motors. All the companies are listed in the US and raised more cash by selling shares in 2021.
However, amid fears of a possible delisting in the US, all three companies have also listed in Hong Kong. NIO also opted for the third listing in Singapore.
Growth Stocks Have Crashed in 2022
Growth stocks have had a horrid time in 2022 amid rising interest rates. Peloton, which was a market favorite in 2020, fell to its lowest level ever yesterday. EV stocks have also looked weak and even NIO trades at a fraction of its 2020 highs. The stock has however recovered from its 2022 lows on reports that China is done with its tech crackdown. The country has also said that it would support the overseas listing of Chinese companies. China had forced Didi to delist from the US markets over concerns over data security.
NIO Was Targeted in a Short-Seller Report but Morgan Stanley Advises Buying the Stock
Earlier this week, short-seller Grizzly Research accused NIO of accounting fraud and said that the company used transactions with Wuhan Weineng, an unconsolidated related party entity, to increase its revenues.
It said that the company’s net loss in the first nine months of 2021 would have been 95% higher and revenues lower by 10% if not for these related party transactions. It also raised doubts over its relationship with the Chinese government, which had bailed out the company in 2020.
Grizzly said, “Our research also revealed hidden and opaque share agreements which benefit the Chinese government at the expense of public shareholders.”
NIO stock is down sharply from its highs but Wall Street analysts are overwhelmingly bullish on the company. Earlier this week, Morgan Stanley analyst Tim Hsiao advised buying NIO stock and called it a “tactical idea.”
The analyst was bullish on the stock heading into the June delivery report and also expects the stock to rise higher in the second half of the year on the launch of new models. NIO is ramping up its production capacity and last year entered into an agreement with its production partner JAC Motors to double the annual production capacity to 240,000 cars.
Still, the capacity is way below that of Tesla which expects to sell 1.5 million cars in 2022. Morgan Stanley is also bullish on Tesla and its analyst Adam Jonas is among the most vocal Tesla bull on Wall Street.
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