Nio earnings are due. The electric car’s momentum collides with the economy’s downturn.

New (New) reported second-quarter earnings early Tuesday with expectations of major electric vehicle deliveries as China’s economy deteriorates. Nio shares rose on Monday, below a key level.

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Sales of the ailing Chinese start-up’s electric cars have picked up steam on the back of new models.

New earnings

estimatesAnalysts expect Nio to extend its loss to 41 cents per American depositary share, from a net loss of 19 cents a year ago.

Revenue is expected to decline 15% year over year to $1.257 billion, according to FactSet. This would be the first drop in revenue since the first quarter of 2020, shortly after the start of the COVID-19 pandemic in China.

results: check back on the Tuesday before opening.

prospects: Nio is expected to share delivery and revenue guidance for the current third quarter. Analysts on average expect revenue of $2.474 billion, up 38% year-over-year, FactSet shows.

new stock

Shares rose 1.8% to 11.02 in stock market action on Monday.

But Nio shares tumbled in August ahead of the startup’s second-quarter earnings report. EV stock is back below the 50-day moving average and is not showing any new buy point yet.

It rose strongly in June and July amid signs of improving sales. The electric vehicle stock has more than halved from its 52-week high, which it reached last September.

Nio is challenging the electric car giants Tesla (TSLA) And BYD (BDDF) in China, along with its startup peers XPeng (XPEV) And Lee Auto (for me).

XPeng missed out on earnings views last week, while Lee Auto (for me) won earlier in August.

On Monday, Chinese electric vehicle and battery giant BYD reported near-record second-quarter profit on strong deliveries of electric vehicles.

Nio EV Deliveries, Expectations

For the second quarter, Nio previously reported an improvement in electric vehicle deliveries. Electric vehicle sales improved further in July.

The startup suffered from poor sales amid difficult industry conditions and its own implementation problems.

After cutting prices for electric cars in mid-June, Nio saw sales momentum improve that month and into July.

It expanded that trend considerably in August with good in-store traffic in the first two weeks of the month, Morgan Stanley analyst Tim Hsiao wrote in a note dated August 23.

Tesla launched an electric car price war in China early this year and made additional discounts in August.

Analysts say Nio’s new ES6 electric SUV will be key to driving growth through the rest of 2023. They say the startup has improved operational execution while cutting non-core expenses.

“We believe (Nio) shares can finally regain momentum after being relatively lagging all year,” Edison Yu, an analyst at Deutsche Bank, said in a note dated August 14. It maintained a Buy rating and raised its price target for Nio stock by $4, to $17.

China’s economic slowdown

But the latest news reports indicate that China’s slowdown is getting worse. Chinese stock markets rose in early trade on Monday, after regulators implemented several stimulus initiatives in the stock and real estate markets.

But the early enthusiasm has waned, with the resumption of the recent trend in outflows taking markets off their highs.

Many investors had hoped for stronger stimulus measures to spur growth. The Chinese economy weakened in July in real estate investment, retail sales and industrial production.

Among the biggest losers on Monday, China Evergrande Group fell nearly 80% on the Hong Kong Stock Exchange, with its shares resuming trading after 17 months.

It is one of the largest real estate developers in China and filed for bankruptcy protection in the US in July. The company had floated in March a plan to restructure about $20 billion of its total debt of $300 billion.

Another major developer in China, Country Garden, has also started issuing warning signs.

Year-to-date, Nio stock is up 12%.

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