Chinese Tesla Rival NIO Plunges After Noting Weak Demand, Ending Factory Plans

Shares of Chinese electric vehicle maker NIO (NIO) are crashing after the company released its quarterly report Tuesday night. "The Tesla (TSLA) of China", NIO, which had its IPO this past September, said in its quarterly report that deliveries of the ES8 in January and February 2019 were 1,805 and 811 vehicles respectively, which reflect a greater than anticipated slowdown in monthly deliveries compared to December 2018. The sequential slowdown in vehicle deliveries in January and February was mainly caused by accelerated deliveries made at the end of last year in anticipation of EV subsidy reductions in China in 2019, the seasonal slowdowns surrounding the January 1 and Chinese New Year holidays, as well as the current slowdown of macro-economic conditions in China, particularly in the automotive sector.

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SEASONAL CHINA SLOWDOWN: "We expect a greater than anticipated sequential decrease in deliveries in the first quarter 2019, partially due to accelerated deliveries made at the end of last year in anticipation of EV subsidy reductions in China in 2019, as well as the seasonal slowdowns surrounding the January 1st and Chinese New Year holidays. We also expect deliveries in the second quarter 2019 to reflect continued weakness as we await the results of the 2019 EV subsidy policy in China and improvement in the macro-economic conditions," said NIO CFO Louis Hsieh.

TERMINATES FACTORY PLANS: In 2017, NIO signed framework agreements and memorandums with the government and related entities in Jia Ding, Shanghai, to build a manufacturing plant for NIO. Recently, the company has agreed in principle with these contractual counterparties to terminate the plan for this manufacturing plant, pending signing of the definitive termination agreement.

PRICE ACTION: Shares of NIO are down over 20% to $8.08 per share in afternoon trading, while Tesla shares are fractionally higher.

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