$NIO Major Room For GrowthDespite news of inflation remaining near zero in China in May, Nio Inc. (NYSE: NIO) has finally ended months of declining sales and has reached its June delivery target. Furthermore, NIO’s investment in the Australian lithium miner Greenwing Resources Ltd. may prove its importance with the expected shortage of lithium batteries as early as 2025. It is also worth noting that NIO has announced new investment from the Abu Dhabi government which could mean that expansion in the Middle East is not out of the question for NIO. All of that indicates that the NIO stock forecast could be bullish in the long term.
NIO Fundamentals
Risk of Deflation In China
With inflation reaching zero in China and being on the brink of deflation, NIO and other Chinese EV manufacturers are at risk of seeing declining sales since it can discourage spending as consumers postpone purchases in anticipation of even lower prices.
Despite inflation reaching zero in China, NIO delivered 10,707 vehicles in June ending months of declining sales and failing to break the 10,000 delivery threshold for the past couple of months. While the risk of deflation will affect Chinese EV sales, the tax exemption for EV purchases that will start in 2024 may help mitigate some of its effects and prevent sales from plummeting. In light of this, NIO could maintain its momentum over the coming months which could see NIO stock run from current levels.
Lithium Battery Shortage
Another risk NIO may be facing is the expected shortage of lithium batteries that EV manufacturers may see as early as 2025 due to a lack of investment in the production of lithium. However, NIO may be able to navigate through this expected shortage since it bought 12% of the Australian lithium miner Greenwing Resources last year for $8.1 million. This deal is now proving its worth for NIO as it will help the company avoid or at least mitigate the shortage EV manufacturers will be seeing.
Technical Analysis
NIO stock’s trend is neutral with the stock trading in a sideways channel between $8.79 and $9.89. Looking at the indicators, the stock is trading above the 200, 50, and 21 MAs which are bullish indications. Meanwhile, the RSI is neutral at 57 and the MACD is bullish.
As for the fundamentals, NIO stock has witnessed two catalysts in the recent investment by the Abu Dhabi government which provides the company with a strong backer, and the June delivery update which saw NIO break the 10,000 delivery threshold. While the risk of deflation in China may impact NIO, the company is well-positioned to navigate through any headwinds it may face thanks to its impressive product.
NIO Forecast
With NIO reaching its delivery target for June despite inflation reaching zero in China, this indicates that the Chinese EV manufacturer may be back on track after a disappointing few months in terms of delivery. Furthermore, NIO’s investment in Greenwing Resources may help it push through the expected lithium battery shortage. NIO may also expand into the Middle East in the future, following the investment from the Abu Dhabi government that it has received. NIO and other Chinese EV manufacturers will be facing a lot of new hurdles, but at the moment, NIO seems to be equipped to navigate those hurdles, which is why NIO is certainly an exciting EV stock.
