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Nio has recorded impressive results in auto production in the past two quarters. But the current halt may be risky for the performance of the company.
Chinese electric vehicle maker Nio Inc (NYSE: NIO) has announced a halt to its auto production activity for 5 days. According to the official announcement, the suspension of its car manufacturing applies to its Hefei plant and the primary reason cited for this unprecedented move is the shortage in the supply of semiconductors.
The challenge of the limited chip supply has been a major source of concern to industries including mobile phones and automakers amongst others whose operations depend solely on the abundance of this vital electronic component. While the situation is caused by a number of factors, the existing trade restriction or ban on Chinese firms to obtain chips from US suppliers is one of the most concerning.
“The Company decides to temporarily suspend the vehicle production activity in the JAC-NIO manufacturing plant in Hefei for five working days starting from March 29, 2021, due to semiconductor shortage,” Nio said in a statement. “The overall supply constraint of semiconductors has impacted the Company’s production volume in March 2021. The Company expects to deliver approximately 19,500 vehicles in the first quarter of 2021, adjusted from previously released outlook of 20,000 to 20,500 vehicles,” the company added.
The Nio manufacturing halt disclosure has caused a prick on the current performance of its stock which slipped 7.78% in the pre-market to $34.99 at the time of writing.
Nio Production Halt May Dent Its Stellar Run
Nio has seen and recorded an impressive performance in the past two quarters per its auto production and subsequently, its delivery strides. Nio reportedly trailed a five-month growth in January after revealing it delivered as much as 7,000 units of its EV brands in December.
The record deliveries placed the company at the top of the chart of EV manufacturers in China, despite the COVID-19 induced challenges toward production and logistics.
“Against this backdrop, NIO has achieved consecutive record-highs along the way, and closed the year on a high note with remarkable December deliveries of over 7,000 vehicles,” said William Bin Li, Founder, CEO, and Chairman of Nio.
While the December figure was applaudable, Nio topped this growth, delivering a record 7,200 vehicles in January 2021, an increase of 352% in its yearly growth. Per the Jan figures, the EC6 car model which is a 5-seater premium electric coupe SUV had the highest number of deliveries with 2,845.
However, the current halt in production may place a dent in the performance of the company, and while the problem according to Reuters is a general one in the auto world that has also affected other industry giants including Honda Motor Co Ltd (TYO: 7267), and Volvo AB (STO: VOLV-B) amongst others, the impact for Nio if it lingers may weigh on its projected targets and fight for a good market share amidst growing competition in the EV industry.