Nio’s (NYSE:NIO)
Charging stations for electric vehicles (EVs) and their suppliers in China’s Sichuan province are in danger due to the region’s severe drought. Nio’s stock dropped by as much as 3% on Thursday as investors fretted over the scandal’s impact on the Chinese auto market.
What’s the Reason for the Stock Decline?
Nio (NYSE:NIO) is one of the top success stories in the Chinese electric car sector, with notable achievements in European export sales and domestic brand recognition in China. However, the hot and dry Chinese summer may soon strain the company’s operations.
Lower than usual water levels on the Sichuan River in central China have reduced hydroelectric power production, leading to the shutdown of some local factories. A large ToyotOne of the affected factories is a Motor and Contemporary Amperex Technology (CATL) battery plant that supplies batteries to Nio and other electric vehicle makers is one of the factories has halted production until at least August 20. About 100 GWh of battery production capacity is already in place or in the works for CATL in the area.
The company and other manufacturers have reportedly reduced their charging services in the area due to the power outage, though it’s too soon to tell how much of an impact this will have on Nio sales.
What Next?
On August 25, Nio will hold its annual general meeting, where production plans for the remainder of the year will likely be discussed. While production capacity continues to increase, power outages in China serve as a sobering reminder to investors of the industry’s shaky foundation. Potentially discouraging investors is the possibility that a decline in the reliability of charging facilities among Chinese consumers will dampen demand for electric automobiles.
Nio’s stock price has dropped 37% this year as investors avoid growth stocks amid a slowing economy. The announcement earlier this week that the company’s main competitor, Li Auto, is cutting output has likely contributed to this decline. While Nio’s future looks bright, the company’s near-term growth prospects are uncertain.
Featured Image: Megapixl @Michaelvi
Author Shariq Khan 
