Why Nio Stock Is Sinking Today

Shares of Chinese electric-vehicle maker Nio (NYSE:NIO) opened sharply lower in U.S. trading on Monday amid a broad market sell-off triggered by rising global tensions and interest rate fears ahead of a key U.S. Federal Reserve meeting. 

As of 10:15 a.m. ET, Nio's American depositary shares were down about 11.9% from Friday's closing price.

Nio was just one of many companies that saw their shares hit hard in early trading on Monday. Traders and investors are concerned about higher interest rates, which now seem likely amid the highest inflation in years. The U.S. Federal Reserve will begin a two-day meeting on Tuesday that could end with a signal that rates will begin rising as soon as March.

Nio confirmed recently that it's on track to launch its next new product, the ET7 sedan, in March. Two more new Nio models are expected before the end of 2022. Image source: Nio.

To be clear, there was no negative company-specific news driving Nio's shares lower on Monday. In fact, the company got some praise from analysts at Chinese investment bank Guosheng Securities, which initiated coverage of Nio with a buy rating and a price target of $50.

Analysts Xia Jun, Xia Tian, and Liu Lan noted that "new energy vehicles," a commonly used category in China that includes plug-in hybrids and pure electric vehicles, exceeded 20% of new-car sales in China in December and are expected to make up 40% of passenger-vehicle sales in the country by 2025. 

The analysts believe that Nio has already established a "strong foothold" in the upscale EV market, which leaves it well positioned to ride that rising wave of adoption. They expect Nio to be delivering roughly 500,000 vehicles a year by 2025, up from 91,429 in 2021. 

I concur with the Guosheng team: With three new models expected in 2022, and the company moving ahead quickly with more advanced driver-assist features, Nio's sales seem likely to gain significant upward momentum as the year unfolds. The stock may be surfing rough waters right now, but the long-term bull case for the company appears to be intact. 

Electric-vehicle investors can look forward to a more detailed update when Nio reports its fourth-quarter and full-year 2021 results, likely in the second half of February.