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Saturday, June 19, 2021

NIO Limited (NIO) falls in Pre-Market today: What’s going on?

NIO Limited (NIO), an electric vehicle maker in China, today announced the suspension of its production for five working days from Monday at its Hefei plant after which the NIO stock saw a fall of 0.40% to drop at $37.79 a share in today’s pre-market session as of this writing. NIO stock was green at the previous trading session and closed at 37.94$ a share with a 2.65% gain. Let’s take a look at current happenings.


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Production Suspension

Chinese Electric vehicle maker has recently announced that it will temporarily suspend its production for five working days from Monday due to the shortage of semiconductor chips. Furthermore NIO Limited has estimated the new delivery forecast for its vehicles to be nearly 19500 vehicles for the first quarter of 2021 while it previously projected its vehicle deliveries between  20,000 to 20,500for the first quarter.

NIO limited is not the only automaker to halt the production as we find many other companies that did the same in recent days. Honda Motor Co Ltd. and General Motors Co.also did an announcement this week to expand the suspension for their production in plants at North America mainly due to the shortage of semiconductor chips.

Volvo AB, a Swedish truck manufacturer alarmingly said this week that chip shortage will significantly impact its second-quarter earnings and will stop the production at truck manufacturing sites in the beginning of April.

Why Chip Shortage Occurred?

COVID-19 has affected the whole world in all aspects of life and the manufacturing industry is greatly hit by this deadly pandemic. The factory shutdown due to this pandemic resulted in less production of chips while on the other hand, shifting of many businesses from offline to online resulted in the high demand for electronic products especially laptops and tablets that caused the high demand and less supply of chips. In addition to the above factors, sanctions against Chinese Tech companies have further contributed to this shortage

Conclusion:

Individuals are responding to the production suspension news announced by NIO stock today.NIO stock has been going through a difficult time and recently it sold $31 million worth of factory equipment to Tesla in order to maintain its capital in these hard days. Hence investors eyeing the NIO stock are required to do both fundamental and technical analysis about this stock.

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