Why Did NIO Stock Crash (Is NIO a Buy) 🔔
NIO Stock Crash today, so is NIO Stock a Buy? Why Did I buy NIO Stock in 2019? In this NIO Stock Analysis 2019 video we discuss the Tesla of China and why NIO Stock Crashed and if NIO is still a buy or not. The Chinese government made a HUGE announcement that has caused NIO Stock to crash and NIO Stock dropped below $5 - something most investors thought would never happen! These CORE fundamental changes in the industry that is driving this selling is important to understand, and that's what we'll cover in today's video.
The Chinese government announced they will be "cutting subsidies for electric vehicles to boost high-quality development". If you weren't aware, China has incentives for consumers to purchase an EV vs a traditional gas or ICE vehicle. So previously any EV that provided 400km of range or more, had a subsidy of 50,000 yuan, which is around $7500 USD. This is quite a substantial discount and was a big driving factor for companies like NIO that sells a SUV that fits this criteria of 400km range or more. The ES8 from NIO currently starts at $448000 RMB, which is about $66,709.35 USD and this is for the 7 seater version which is currently the only model they sell. You can also see they have the 6 seater listed here, but it isn't in production yet, and it will cost a bit more too. NIO also announced preorders for their new ES6 - which begin deliveries later in 2019, but this will be even cheaper and priced around $53,000 USD for the base model. Now the ES6 will also give us above that 400km threshold, actually giving us 500km range per charge which is impressive and you get tons of horsepower as well - so it's no slouch.
If you're thinking well Tesla has a competitor already - the Model X - check out the pricing. Tesla recently lowered prices on their cars in China, but even with that, the cost of the Model X is much more than the NIO ES6 and ES8. The cheapest model x comes in at just under $116000 USD (used to be 142k USD) and this means that it is about $49000 MORE expensive! Majority of Chinese citizens cannot afford this sort of vehicle (most Americans wont be able to either to be fair!). So this is why in my video yesterday, I went over why I bought NIO stock. If you haven't watched that video go here: https://goo.gl/9rcUZy
So - NIO stock is crashing and the thing that's scaring investors right now is this subsidy cut. Everyone has been bullish on the government supporting EVs, but the government just cut this subsidy for EVs by HALF! The reasoning is as follows: "China will reduce subsidies for new energy cars as the industry starts to enjoy economies of scale and declining costs" and cutting the EV credit is "a move to support high-quality development of a new-energy automobile industry and boost innovation in the sector." So "According to a joint statement released by government agencies, they said that the subsidy for pure battery electric cars with a driving range of 400km and above will be cut by 50 per cent to 25,000 yuan per vehicle from 50,000 yuan". This is a huge blow to the EV market in China and actually hurts companies like NIO - because now it's less incentive for people to buy an EV vs a regular car. With this cut, the ES8 now costs $63250 - a 6% increase in price. To offset this, consumers would need a 6% increase in pay, after taxes, for it to actually make sense to buy the SUV still.
Tesla also lowered prices on their Model 3 and now the cheapest Model 3 comes in CHEAPER than the cheapest ES8 from NIO! The Model 3 will come in at under $61000 - and even without any subsidies for EV, will be cheaper than the ES8. I understand the argument that SUV's are more popular, and are usually more expensive than cars - which is true, but you have to also consider Tesla's brand. Similar to APPLE and iPhones in China, certain segment of consumers seek the brand, and Tesla is a much more prestigious brand than NIO. Don't underestimate the power of a brand!
#NIO #NIOStock #PositiveInvesting
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