August 8, 2022

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Why NIO Inventory Is Bigger These days

What transpired

Shares of NIO (NYSE:NIO) were transferring better on Monday soon after the Chinese electrical-automobile maker reported that its manufacturing companion had agreed to double its generation capacity to make up to 240,000 NIOs for every yr. 

As of 1:15 p.m. EDT, NIO’s American depositary shares were being up about 5.7{ef1bfe4afb8c637c3d9b733b168b5a276a6c840b9e3c68899db88d855f264c06} from Friday’s closing cost.

So what

Some history: NIO will not individual a factory its motor vehicles are made underneath contract by a joint enterprise with governing administration-owned automaker Jianghuai Car Team, or JAC, in a JAC-owned manufacturing facility in the industrial city of Hefei, in close proximity to NIO’s headquarters. 

NIO explained on Monday morning that it has signed a new three-yr deal with JAC to proceed that arrangement via (at least) May well of 2024. As aspect of the deal, JAC has agreed to maximize the generation potential of the manufacturing unit to 240,000 motor vehicles per yr, or 20,000 for each thirty day period — double its current ability. 

The JAC-owned NIO manufacturing facility developed its 100,000th car in April. NIO and JAC reported they have agreed to carry on the romantic relationship for 3 a lot more years. Graphic resource: NIO.

NIO and JAC failed to say when that ability improve will be in put, but the announcement is possible why NIO’s stock is investing increased right now. 

Now what

Automobile traders who comply with NIO know that the firm has been functioning because late final yr to enhance output at JAC’s manufacturing unit amid quick-climbing need for its stylish electric SUVs. The business was ready to boost the production price from about 5,000 autos a thirty day period to 7,500 for each thirty day period in early January and has pushed it larger given that. 

At a ceremony to mark the 100,000th NIO developed at the manufacturing unit in early April, CEO William Li Bin claimed that the factory can now construct about 10,000 NIOs for each thirty day period. But, Li said, creation has but to hit that determine mainly because of an ongoing worldwide scarcity of automotive semiconductors. 

NIO and most other impacted automakers now assume the chip scarcity to very last into 2022, however supplies are expected to enhance considerably in the 2nd 50 {ef1bfe4afb8c637c3d9b733b168b5a276a6c840b9e3c68899db88d855f264c06} of this year. 

This post signifies the feeling of the writer, who may disagree with the “official” suggestion place of a Motley Fool quality advisory service. We’re motley! Questioning an investing thesis — even one of our possess — allows us all believe critically about investing and make conclusions that aid us become smarter, happier, and richer.