NIO Stock Falls to Record Lows as its EV Sales Slow in China, Cutting 1,000 Jobs
【Summary】Electric vehicle startup NIO Inc is realizing just how hard breaking into the EV market can be. Once viewed as a serious rival to Tesla in China, NIO’s stock fell to record lows on Tuesday after the electric automaker reported a significant drop in vehicle sales in its home market.
Electric vehicle startup NIO Inc is realizing just how hard breaking into the EV market can be. Once viewed as a serious rival to Tesla in China, NIO's stock fell to record lows on Tuesday after the electric automaker reported a significant drop in vehicle sales in its home market.
NIO's second-quarter losses nearly doubled, and its U.S.-listed shares tumbled nearly 25% to $2.02 on Tuesday. NIO said its vehicle sales fell nearly 8% to 1.41 billion yuan ($198.40 million) from 1.54 billion yuan in the preceding quarter. The automaker is citing a cut in subsidies and weak demand.
The company canceled its post-earnings conference call, saying the earnings statement had the required information.
"In response to the overall tempered market conditions, we are also working hard to maximize returns on our resources and have implemented comprehensive efficiency and cost-control measures across the organization," said William Li, founder, chairman and CEO.
NIO's plans to reduce its headcount to around 7,800 by the end of the third quarter was first revealed in an internal email to employees in August.
The earlier layoffs included employees at its U.S. headquarters in San Jose, Calif. NIO closed its San Francisco office in May, which included its UX teams. However, NIO said the layoffs would have little impact on NIO's core operations, including R&D for its vehicles and user services.
China Cutting Subsidies for EVs
According to data from China Association of Automobile Manufacturers (CAAM), electric vehicle sales in China fell 4.7% in July from a year earlier, representing the first drop in more than two years.
China has been cutting government subsidies on zero-emission vehicles, with plans to phase them out completely after 2020. Officials have criticized that some automakers have become overly reliant on the government funds designed to boost the production of electric vehicles.
"The China subsidy cut has been well understood by investors, so all China EV producers are looking at a weak 2H19," Roth Capital analyst Craig Irwin said to Reuters.
NIO said earlier this year subsidies for its flagship ES8, a seven passenger all-electric sport-utility vehicle that's viewed as a rival to the more expensive Tesla's Model X, were slashed to 11,520 yuan ($1,620.87) beginning June 26 from 67,500 ($9,415) yuan last year.
NIO's ES8 costs significantly less in China than its chief rival the Tesla Model X. The Model X starts at 809,000 yuan ($115,000) while the ES8 starts at 448,000 yuan ($62,952).
NIO reported it sold 3,140 ES8's in the second quarter, down from 3,989 in the first quarter. It sold just 413 cars of its lower-priced ES6 model in Q2, a smaller SUV it began delivering to customers in June.
NIO sales were also affected after a video appeared online that was widely-shared on social media showing one of its ES8's catching fire in a parking garage in China. The company was forced to recall 4,803 ES8 SUVs in June after NIO investigators discovered a design flaw in the vehicle's battery pack, which could cause a short circuit.
The recall forced NIO to prioritize battery manufacturing to fix the recalled vehicles, which significantly affected its production and delivery results.
NIO was the first Chinese electric automaker to launch a U.S. IPO. The automaker raised $1 billion last year in it's Sept, 2018 IPO, valuing the automaker at $6.4 billion. NIO hoped to raise $2 billion in its debut on Wall Street, but fell short of expectations.
NIO is backed by big investors, including internet services company Tencent Holdings and Hillhouse Capital Group.
In May NIO signed a deal with a state backed fund for an additional investment of about $1.5 billion as the company burned through its cash.
resource from: Reuters
Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.
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