Tesla Rival Nio Halts Factory Amidst Chip Shortage

Tesla Inc. (NASDAQ:TSLA)’s Chinese competitor Nio Inc. (NYSE:NIO) has announced that it will close its manufacturing plant in Hefei for five straight days due to the ongoing semiconductor shortage.

Nio has experienced production shortcomings due to the lack of availability for the chips used to power their vehicles. The company is expecting first-quarter vehicle deliveries to drop to 19,500 instead of the 20,500 deliveries it was expecting.

Nio’s stock took a hit on the news, dropping to $34.51 per share with a market cap of $54.07 billion on March 16. There is not currently enough data for a Peter Lynch Chart or the GF Value Line to be displayed.

GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rank of 1 out of 10. There is currently one severe warning sign issued for a Sloan ratio indicating poor quality of earnings. The company has struggled with profitability over the years with a negative operating margin and the weighted average cost of capital far exceeding the return on invested capital.

Other top vehicle producers Ford Motor Co. (NYSE:F), General Motors Co. (NYSE:GM) and Honda Motor Co. Ltd. (NYSE:HMC) have also seen their own struggles with production as the demand for vehicles has picked up during the pandemic. Ford was previously partially assembling their ever popular F-150 pickup trucks before announcing it will stop production for several days.

GM and Honda have also announced they will continue to pull back the production of new vehicles throughout the following weeks in hopes that semiconductor manufacturing will catch up to demand.

The chip shortage has been driven by pandemic shutdowns that have affected industries outside of auto makers. The shortage was complicated by the drastic increase in consumer technology demand as people work from home.

Technology giants Microsoft Corp. (NASDAQ:MSFT) and Sony Corp. (NYSE:SNE) immediately sold out of their newest flagship video game consoles during the holiday season of 2020 as pre-release production numbers failed to meet expectations. Both have predicted production numbers to fall short of demand through most of this year and are expecting sales struggles on par with the automotive industry.


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