Visitors look at a Nio ET Preview car on the opening day of the Shanghai Auto Show in Shanghai on April 16, 2019. - Global car makers flock to the Shanghai Auto Show this week with the world's largest vehicle market facing an unfamiliar sales slump just as China veers toward an ultra-competitive electric future.
Greg Baker—AFP/Getty Images
By Aaron Pressman and Adam Lashinsky
Updated: May 31, 2019 12:48 PM ET

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A mere eight months ago I called the Chinese electric car startup Nio “a bright, shiny object masquerading as a real company.” This was in reference to its ultimately successful attempt to raise $1 billion in a U.S. initial public offering. Nio was adept at capital collection, marketing, and even automotive design. Yet it had sold only a few cars while losing gobs of money.

As time has passed Nio has sold more cars, lost even more money, and, critically, let down the investors who believed its premature promise. Nio’s shares have plunged from an offering price of $6.26 each to $3.24. The shares plunged 10% Thursday alone, the day after Nio announced financial results and a slew of strategic shifts.

A weakening Chinese car market, the slow-motion unraveling of its American doppelganger, Tesla, and its own changes are to blame. Nio announced this week it will form a joint venture with a state-controlled company to make down-market cars—the opposite of the high-performance , premium-priced pitch it made to investors last year. Says Breakingviews.com: “ Shareholders who bought one company will end up with another.”

Nio is square in the middle of what tech investors might call the Great Disillusionment of 2019. An appreciation for value goes in cycles. Sometimes investors are willing to pay up for anything that looks like it will grow, whether or not it will ever make money. Other times, investors come to their senses.

Now seems to be one of those times.

Adam Lashinsky
@adamlashinsky
adam_lashinsky@fortune.com

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