Nio, seen as the Tesla of China, crashed 20% after it cut its delivery guidance and canceled plana to build a manufacturing plant in Shanghai.
"We expect a greater than anticipated sequential decrease in deliveries in the first quarter 2019, partially due to accelerated deliveries made at the end of last year in anticipation of EV subsidy reductions in China in 2019, as well as the seasonal slowdowns surrounding the January 1"We also expect deliveries in the second quarter 2019 to reflect continued weakness as we await the results of the 2019 EV subsidy policy in China and improvement in the macro-economic conditions.
The guidance cut prompted analyst Ming Hsun Lee at Bank of America Merrill Lynch to downgrade the stock from"neutral" to"underperform". The firm cut its price target from $8 to $6.80 — 17% below where shares were trading Wednesday. The company's"orders backlog seems to be lower than our previous expectation, and Tesla's recent price cut on Model 3 to secure more share in the premium EV market" could increase competition, Lee in a note seen by Bloomberg.
"NIO still needs to build more NIO House , battery swap stations/charging stations and charging trucks, and it has to spend significantly on marketing to sustain brand equity," Lee said, adding that"if there is a slowdown in volume sales growth, NIO will need more cash to finance its working capital and capex plan."
Elsewhere, China Development Bank's board approved the sale of 4.67 million American depositary shares of NIO, representing about 0.44% of NIO issued share capital, at a price no lower than $7.15 per share, Bloomberg reported on Wednesday.
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