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NIO is halting production at a plant in China’s Hefei for five days.
Sean Gallup/Getty Images
The Chinese electric vehicle maker
NIO
is getting hit by the microchip shortage that is roiling the entire automotive industry. The company said Friday it was curtailing production because it just doesn’t have the parts.
The news is hitting the shares. NIO (ticker: NIO) stock is down 5% in early trading. The
S&P 500
and
Dow Jones Industrial Average,
for comparison, were both up about 0.4%.
NIO is temporarily suspending vehicle production at its JAC-NIO manufacturing plant in Hefei for five working days starting from Monday. JAC is NIO’s contract manufacturing partner.
Both
General Motors
(GM) and
Ford Motor
(F) have unexpectedly halted plants because of the same issue.
The parts shortage creates an interesting situation for investors. NIO, and other EV makers, are valued like growth stocks, and the chip shortage is affecting their growth. Investors have to decide whether or not to give the company a pass on any shortfall in its delivery numbers for the first and second quarters.
NIO said the shortage has affected the company’s first-quarter production. The company now expects to deliver about 19,500 vehicles in the first three months of this year, while its previous forecast was 20,000 to 20,500 cars.
NIO delivered more than 17,000 vehicles in the fourth quarter. January deliveries came in at about 7,200 and February deliveries ended up at 5,578. That means March deliveries will be about 6,700 cars.
Investors, at this point, don’t seem to know what to do. The chip shortage is one of a few issues hitting the stock. With Friday’s declines, NIO shares are down roughly 25% year to date and off more than 40% from their 52-week high of about $67.
Weaker than expected February deliveries hit the shares. But February is the month of the Lunar New Year holiday, which essentially shuts down sales for about two weeks.
Rising interest rates are another issue for NIO, as they are for many richly valued, high-growth stocks. Tesla (TSLA) stock, for instance is down roughly 10% year to date.
Higher rates make growth more expensive to finance, and NIO isn’t profitable yet, so it can’t pay for its expansion with its own earnings. Also, high growth-companies are expected to generate most of their cash flow far in the future. That cash flow is worth a little less, relatively speaking, when investors can earn higher interest rates on their cash today.
Write to Al Root at [email protected]