Why a Strong Q1 GDP for China Is Not Enough to Lift NIO Stock Today

InvestorPlace

Apr. 16, 2024, 02:02 PM

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Chinese electric vehicle (EV) maker Nio (NYSE:NIO) is sliding today even despite stronger-than-expected first-quarter gross domestic product (GDP) growth. Indeed, NIO stock is eyeing a 2% loss heading into the close while Wall Street grapples with a divisive GDP report from the world’s second-largest economy.

What do you need to know about Nio lately?

Well, NIO stock has taken backseat today to China’s 5.3% economic growth in its first quarter. Unfortunately, most of the growth came in the first two months of the year. Retail sales and industrial output both lulled in March, suggesting there may be an incoming cold front.

“Markets may find it hard to be convinced by the strong GDP growth print and difficult to reconcile with the mixed March data,” said Credit Agricole Chief China Economist Xiaojia Zhi, per Bloomberg. “There could be also concerns that if GDP growth remains above 5% as data suggest, policymakers would be quite comfortable and see no pressure to further ease their policies.”

This has put China’s economic recovery in a tenuous place. While 5.3% GDP growth puts the country on track for its 5% annual growth goal, rising unemployment, slowing demand and factory output point to some road bumps on the way.

NIO Stock Continues to Suffer Major Losses in 2024

With today’s dip, the EV maker continues to tread further into the red this year. NIO stock is down more than 54% year-to-date (YTD) as EV adoption slows considerably from years prior. Nio also faces intense competition from other Chinese EV makers and notable headwinds eating away at the entire sector.

Investors are also likely reeling from the company’s recent guidance reduction for Q1 deliveries. Indeed, in late March, Nio lowered its forecast for Q1 deliveries as a result of slowing demand.

Not alone, EV makers in general have experienced a sales slump this year. This includes the world’s largest EV maker, Tesla (NASDAQ:TSLA), which has also experienced a notable drawdown in 2024.

Nio has become something of a cautionary tale in the eyes of many analysts, including InvestorPlace contributor Chris MacDonald.

“Despite efforts like expanding battery swap stations, Nio faces hurdles in increasing sales and achieving profitability. The company’s costly infrastructure expansion and past station performance raise doubts about its effectiveness,” said MacDonald.

On the date of publication, Shrey Dua did not hold (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.

With degrees in economics and journalism, Shrey Dua leverages his ample experience in media and reporting to contribute well-informed articles covering everything from financial regulation and the electric vehicle industry to the housing market and monetary policy. Shrey’s articles have featured in the likes of Morning Brew, Real Clear Markets, the Downline Podcast, and more.