Electric vehicle manufacturer NIO (NYSE:NIO) has seen its shares rally in the past 10 days. So what’s caused the NIO share price to rally, and should I look to add the shares to my holdings? Let’s take a closer look at recent developments and potential issues ahead to help me make a decision.
NIO share price rallies
As I write, NIO shares are trading for $21. On March 14, the shares were trading for $14, which is a 50% increase in the space of 10 days.
I believe this recent mini-rally has been partly due to a change in stance from the Chinese government. Initially, the Chinese government wasn’t happy when large firms were listing their businesses outside of the country, especially in the US, but it has since changed tack. This has seen investor sentiment sweeten, in turn sending NIO shares upwards.
The NIO share price has been volatile for a long time now for many different reasons. Looking back, I can see the shares were trading for $36 at this time last year, which is a 41% decline over a 12-month period. The shares reached as high as $50 in June 2021, which is an even bigger drop of 57%.
Recent events and issues ahead
One of the main sources of data that provide an overview of progress is NIO’s vehicle delivery reports. The February report showed that NIO delivered 6,131 vehicles. This is an increase of 9.9% year on year. The total number of delivered vehicles in 2022 reached 15,783, which is an increase of 23.3% year on year. The reason this is key information is because delivered vehicles are what potential and existing investors look at to show whether or not production is going to boost performance and profit.
I do have some major concerns with the NIO share price and the impact of macroeconomic issues currently facing the business. The major issue is that of the current supply chain crisis and global semiconductor shortage. This could see production levels and delivered vehicles numbers slump, affecting performance and investor sentiment. For example, the February numbers were the lowest number of vehicles delivered for four months.
In addition to this, the high cost of lithium, which has doubled in 2022 alone to date, is a concern. Lithium is a key component of electric vehicle batteries. This could impact the overall prices of electric cars and squeeze profit margins further.
What I’m doing now
The NIO share price also rallied due to rumours of a new model recently, although it only seems to be speculation at this moment in time. Looking at the bigger picture, the issues NIO faces outweigh any potential positives such as its growth plans as well as some of its unique selling points, such as its battery swapping ability, in my opinion.
Currently, I would not buy NIO shares for my holdings. I will keep a keen eye on developments, however. I think the NIO share price will continue to meander upwards and downwards in the coming months based on macroeconomic and geopolitical events.