2023 could be a year of recovery for China-based electric vehicle (EV) manufacturer Nio (NYSE:NIO). You might be surprised that NIO stock traders largely shook off Nio’s seemingly weak January sales numbers. However, there’s a logical explanation for this. Besides, Nio’s price-cutting strategy should help to make the automaker more competitive.
Last year’s on-and-off Covid-19 lockdowns in China certainly didn’t make it easier for Nio to succeed as a business venture. Then, there were supply-chain disruptions to deal with. So, what will this year bring for Nio and the company’s loyal shareholders?
Even if 2023 is off to a shaky start, there’s hope for improvement, as Nio’s monthly data isn’t as bad as it might seem. The bull case for Nio is still intact, so consider staying in the trade and possibly even adding to your share position.
NIO Stock Rises After Release of Monthly Delivery Figures
The NIO stock price went up after the automaker released its delivery numbers for January 2023. This might be a surprising outcome, as the numbers indicated contraction, not growth.
Here’s the breakdown. In January 2023, Nio delivered 8,506 vehicles. That’s down 46% month over month and down 12% year over year.
Yet, NIO stock rose 1.8% in premarket trading after the release of Nio’s quarterly delivery figures. Why did this happen? It seems that the numbers weren’t as bad as anticipated.
Financial traders were preparing for a rough January after a strong December. That’s because in December, some EV-purchase incentives ended and people rushed to buy cars before the end of the year.
Citi analyst Jeff Chung wrote, “The street should not read too much into the poor Jan sales at the current stage,” and I tend to agree with this. Really, the low January numbers are just a setup for relative improvement in the coming months.
Nio’s Vehicle Price Reductions Are a Smart Strategy
Although Nio hasn’t issued a press release specifically about this, the company is reportedly implementing price reductions on some of its vehicles. This is a smart strategy that could potentially help to increase sales volumes in February and afterward.
William Li, Nio’s founder, acknowledged that “Market competition is becoming more and more fierce.” So, the company is doing what’s necessary to stay competitive in 2023.
This reportedly includes reducing the prices of Nio’s ES6, ES8 and ES7 models. Evidently, there are also national subsidies in China for qualifying purchases that car buyers may be able to take advantage of.
What You Can Do Now
It makes perfect sense for Nio to implement EV price reductions now. This should have a positive impact on the automaker’s vehicle sales.
And, if Nio’s delivery figures for February and afterward indicate strong improvement, NIO stock will likely get a nice boost. Therefore, the bull case for Nio remains quite strong, and you can start a share position or add a few shares to an existing position today.
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 InvestorPlace.com Publishing Guidelines.