It's been a wild ride for investors in Nio (NYSE: NIO) so far this year. The electric vehicle (EV) stock gained a solid 23.8% in January, only to give up all of those gains and then some the next month -- it plunged by 22% in February, according to data provided by S&P Global Market Intelligence. That left the stock down 3.7% for the year.

After delivering a record number of vehicles in December, Nio reported a sharp 46% sequential drop in deliveries in January. Although the Chinese New Year hurt deliveries for most automakers in that country, when it came to Nio, investors feared the worst -- decelerating growth ahead. Those fears were exacerbated when reports surfaced that Nio was offering hefty discounts on its cars. That appeared to be a reaction to rival Tesla's aggressive price cuts in China, which seem to have triggered a price war and portend a slowdown in China's EV industry.

Nio indeed did offer incentives to car buyers, but it wasn't only because of competition. Nio is transitioning all of its old models to a second-generation platform, NT 2.0, and therefore wanted to clear out its inventory of first-generation models as it phased them out. The incentives were part of its plan to move that older stock.

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Source Fool.com