Nio stock price slowly approaches its make or break point

Nio (NYSE: NIO) stock price continues to trail Tesla badly as concerns about the company’s growth prospects. The company’s stock was trading at $10.20 on Tuesday, about 22% below the highest level in 2023. Other Chinese EV stocks like Xpeng and Li Auto have continued retreating.

Nio to build European cars

Nio has had a strong performance in China, where the company sells most of its cars. As part of its global expansion plans, the company is now considering to build a new factory focused on European cars. According to Reuters, the new plant will be focused on smaller vehicles that are generally popular in key European markets.

The European market is a big one considering that millions of cars are sold in the bloc per year. However, the main challenge is that the amount of competition in the region is fierce. This competition comes from European companies like Volkswagen, Renault, Fiat, and Peugeot among others. All these firms have unveiled their EV strategy.

The biggest challenge for Nio and other EV companies in China is that the economic recovery is uneven and is not as strong as expected. Delivery data showed that Nio delivered over 15k cars in December followed by 8k in January. Nio and companies like Tesla have been forced to slash prices in a bid to boost demand. No company cuts prices in an era of robust demand.

Another fact that investors are contending with is that the market for premium cars in China is actually not all that big. Nio’ cars retail for more than $50,000, which is not all that affordable to most people in China and even in many developed countries. 

At the same time, the sector is highly competitive, with other premium brands like Xpeng seeking to take market share. The company is building affordable vehicles that will be launched in 2024. 

Nio stock price forecast

Nio chart by TradingView

The daily chart shows that the Nio share price has been in a strong bearish trend after peaking at $13.16 in January. It has formed what looks like an M pattern whose lower side is shown in green. This price is along the lower side of the ascending channel. The stock has moved below the 25-day moving average. 

Therefore, Nio shares are at a major decisive point since moving below the lower side of the M will signal that there are more sellers in the market. If this happens, the next level to watch will be at $8.