Use Caution: You'll Need Shock Absorbers to Stay in the NIO Stock Trade

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Electric vehicle manufacturer Nio (NYSE:NIO) is based in China, which could present difficulties during this time of international tension. The last thing you need is to increase your portfolio’s volatility, so there’s no need to rush into a hasty trade with NIO stock.

The uncertainty surrounding Nio was heightened recently as the automaker’s chief financial officer, Steven Wei Feng, just resigned. The company has a new CFO, but Nio’s future remains uncertain. Let’s investigate why NIO stock hasn’t made any progress this year.

Nio Joins the EV Price War

There were a few bumps along the way, but the Nio share price is still down substantially year-to-date. This is the case even after Nio’s positive June EV delivery report.

It just goes to show that one good month, by itself, probably isn’t enough to convince investors that Nio is running on all cylinders.

It’s also worrisome that Nio seems to be reneging on the company’s commitment to steer clear of the EV price war. As recently as April, Nio CEO William Li audaciously declared, “[W]e will certainly not join the price war.”

That declaration didn’t age well. With Nio preparing to roll out its low-priced Onvo and Firefly EV brands, it’s fair to say that the automaker is, indeed, joining the price war.

Thus, one might conclude that Nio is only lowering its vehicle prices reluctantly. Time will tell whether the company will take a big hit in its profit margins later this year and in 2025.

Nio Could Struggle Amid Trade Frictions

Here’s another reason why NIO stock may be volatile for the remainder of 2024 at least. Nio is caught in the crossfire of trade frictions spanning multiple continents.

Make no mistake about it, Nio definitely wants to expand its presence in Europe. Once a China-focused startup, Nio has multinational aspirations.

Yet, this isn’t a great time for Nio to pursue those aspirations. President Joe Biden’s administration is quadrupling the tariffs on China-made EVs.

Meanwhile, former president and current presidential candidate Donald Trump would very likely impose and/or maintain tariffs on Chinese vehicles.

While this is going on, the European Union is moving forward with its own tariffs on China-made EVs. On top of all that, Canada’s government is considering imposing new tariffs on EVs made in China.

So, Nio’s prospective investors should consider whether they really want to expose their portfolios to these tariff troubles.

NIO Stock Could Struggle in 2024’s Second Half

Nio’s investors lost money in the first half 2024. Will the second half be any better? It’s hard to be optimistic when Nio seems to be reluctantly entering into an EV price war now.

Moreover, Nio’s international expansion plans will probably encounter some speed bumps because of trade tensions.

Therefore, NIO stock could be volatile in this year’s second half. All in all, the risk-to-reward profile doesn’t look very favorable, so there’s no urgent need to buy Nio shares now.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.

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