NIO Stock: China’s Tesla Starts Sample Production on Model 3 Rival

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Chinese electric carmaker Nio (NYSE:NIO) is again in the news. It is producing cars at its newest production facility, NeoPark, in the province of Hefei. In September, the company will release its latest model, the ET5, and has started test production at the facility, and investors are watching to see how it affects NIO stock.

NeoPark will cover 4.4 square miles, and when it is complete, it will have a total capacity of a million vehicles and 100 gigawatt-hours of batteries. This is great news for NIO stock, which has struggled in the last six months and is down 49% in the year thus far.

The ET5 is touted as NIO’s answer to Tesla’s Model 3. The company’s latest release is an exciting one. It has an impressive range of 600 miles on a single charge and comes equipped with premium features that make it highly desirable in China. It will allow NIO to compete with Tesla (NASDAQ:TSLA) in the mainland’s premium electric vehicle (EV) segment and grow sales in an otherwise lackluster year.

The news comes at just the right time for NIO. Operations at the site began less than three weeks after work was suspended at the company’s first factory in Shanghai for five days. The suspension came as the result of supply chain issues.

Recently, there have been a few cases in which the coronavirus has demonstrated its potential to become even more invasive, with the worst spike in cases recorded since this virus first revealed itself. To combat this, Beijing has not only put in place strict policies to reduce infection of people but also stepped up lockdowns.

Currently, NIO stock is being hammered due to supply chain issues and lackluster delivery numbers. However, after falling so steeply, one cannot help but think of the company as a contrarian play.

NIO Stock Is a Buy After Steep Correction

The Chinese EV industry is struggling at the moment. The country has been trying to move away from its heavy reliance on fossil fuels and toward electric vehicles. However, the trade war with the U.S. and the recent geopolitical tensions are not helping matters.

In addition, if the issues with Covid-19 weren’t enough, the country is now experiencing problems in managing supply chains.

Nio reported 5,074 EV deliveries in April. Nio had lower shipments in April than any other month in the year thus far.

However, not everything is negative.

Nio’s annual report shows that it had $8.3 billion in cash and investments at the end of last year. That means it will be able to continue operating smoothly during the Covid-19 situation. Nio has had to cut production since late March. It revealed in their annual filing that it has not yet been able to restart full operations.

The company confirmed its plans for international expansion, stating that it will be delivering the ET5 model starting in September. They plan to hit a couple of new markets in addition to China and Norway.

On the publication date, Faizan Farooque 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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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