Nio (NYSE) recently announced that it had been forced to stop production of EVs in China because of new COVID-19 locks.

NIO stock prices plummeted as investors fear the company will not meet its delivery and production targets.

Martin Heung, a Nomura analyst, argues that overall the situation isn’t as dire as originally thought.

“The market has widely believed that NIO is undertaking a complete production halt. NIO management stated that production will continue on weekdays despite the temporary halt. However, this is only for weekends. According to management, the affected suppliers are responsible for exterior body parts of vehicles (from Jilin) and engineering components (from Shanghai) that are essential for automotive electrification,” Heung said in a client note.

The analyst added that Nio’s management is hopeful of restarting EV production in the coming days with the normal level of functionality expected to be achieved in 2-3 weeks.

“On the completion and initial production run of the second manufacturing plant in NeoPark, NIO reiterates these remain on schedule (in 3Q22) so long as the pandemic does not spread beyond Shanghai, which is only 470km from Hefei,” Heung added.

Analyst has a Buy rating with a Nio price target of $51.50 per share.

By Senad Karaahmetovic