Nio stock price forecast: analysis as it breaks key support

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on Jan 17, 2024
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  • Nio share price has crashed by over 90% from its highest point in 2021.
  • The company is facing substantial challenges as competition rises.
  • The EV industry is getting highly saturated, hitting margins.

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Nio (NYSE: NIO) stock price is in its third consecutive week in the red as concerns about the EV industry continued. The stock crashed to a low of $6.55 on Tuesday and is now sitting at its lowest level since June 2020. It has fallen sharply from its all-time high of $67, which it reached in January 2021.

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EV bubble and saturation

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Nio and other EV companies are not doing well. Tesla, often seen as the gold standard of the sector, has crashed by over 28% from its highest point in 2023. It has also been overtaken by Byd and forced to slash prices in a bid to gain market share and hit its production target. 

At the same time, smaller EV companies like Mullen Automotive, Canoo, and Fisker are incinerating cash. The sector is also going through a period of saturation as most companies boost their vehicle production.

Nio is caught up in this challenge as well, which explains why its stock has plunged while its short interest has jumped to over 15%. This is a sign that many investors still believe that the stock has more downside to go.

Nio’s challenge is that it specializes on China, a market that has become highly saturated from brands like Xpeng, Li Auto, Byd, and Tesla. It is also facing significant competition challenges in Europe, where Chinese companies are aiming to gain share. 

In 2023, the EU started a review of China’s EV subsidies and how they will affect their industry. The concern in Europe is that companies like Nio and Byd are highly subsidised in China, making them cheaper than those made in the region.

Nio has continued to boost its deliveries in the past few months. It delivered 18,012 vehicles in December, a 13.9% YoY increase. It was the third straight month that its deliveries jumped. In all, Nio delivered 160,038 vehicles in 2023, up by 30.7%.

Nio has also raised cash recently from CYVN, a company based in Abu Dhabi. This $2.2 billion deal gives the company good access to a region that is growing exponentially, helped by tourism, finance, and energy sectors. These funds mean that Nio will likely not need any more funds in the foreseeable future.

The other challenge the company is facing is that its margins have thinned. It had a gross margin of 8% in Q3, down from 13.3% in the same period in 2022. It blamed this to vehicle margins as the company joined other EVs to slash prices.

Nio stock price forecast

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Nio stock

NIO chart by TradingView

Turning to the weekly chart, we see that the Nio share price has been in a strong downward trend in the past few months. Its performance this week was notable since the stock managed to move below the key support at $7, the lowest swing on May 30th. This is a sign that bears have prevailed, as I wrote in December.

Nio’s stock has remained below the descending trendline, which connects its highest points since February 2022. It has remained below the 50-week and 100-week Exponential Moving Averages (EMA).

The Relative Strength Index (RSI) has also moved below the neutral point of 50. Therefore, the outlook for the stock is bearish, with the next point to watch being at the psychological level of $5, which is about 23% below the current level.

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