Here's Why Nio Is Suspending Production And Asking For 'Understanding From Customers'

China is grappling with a renewed surge of COVID-19 and the impact is reverberating across the corporate landscape. Local EV startup Nio, Inc. (NASDAQ: NIO) has joined EV leader Tesla, Inc. (NASDAQ: TSLA) in suspending production at its plant.

What Happened: Shanghai-headquartered Nio said it is halting car production, CnEVPost reported, citing a statement posted by the company on its mobile app. The company blamed the predicament on issues with several of its suppliers, which had to shutter plants is several places, including Jilin, Shanghai and Jiangsu.

These companies are yet to resume production in full swing.

"There will be a delay in the delivery of vehicles for many customers in the near future, and we ask for your understanding."

Nio reportedly said it will work with its supply chain partners to resume production and meet delivery obligations as soon as possible. At the same time, the company said it will adhere with the COVID protocols put in place.

Related Link: Will Nio's Newly-launched ET5 Pose A Threat To Tesla's Model 3?

Why It's Important: Nio shares are stuck in a rut after peaking at $66.99 in early January 2021. Faced with production disruptions, the company had to rein in deliveries during the year.

That was all expected to change with the dawn of 2022, as the company planned to roll out at least three new models over the course of the year. Nio began deliveries of one of the three models – the ET7 sedan – in late March.

The COVID outbreak in China appears to be pouring cold water on the company's recovery plans. Nio reported earlier this month it delivered 25,768 cars in the first quarter, a quarterly record.

Incidentally, Tesla's Giga Shanghai is currently under a shutdown. The company also had to stop production a couple of times earlier in March.

Nio closed Friday's session at $20, down 1.77%.

Related Link: This Cathie Wood-Backed Chinese EV Maker Becomes Latest To Push Back New Vehicle Launch