Can Nio Save their Sinking Ship?
If you’ve been following EV news for the last few years, then you most likely would have heard of Nio or the Tesla of China as they are sometimes called. To give you a brief overview, Nio are a Chinese electric car company who first made headlines in 2014 when their EP9 supercar set a new record at the Nurburgring in Germany. The rapid Nio EP9 conquered the ‘ring in a time of 6 minutes and 45 seconds, making it the fastest production car around the track at the time. Yes, this largely unknown company came out of nowhere and stole the title from some of the other long time European thoroughbreds. It came as a shock to everyone in the car industry and it was the perfect way for Nio to set the stage for their future EVs. They’ve also been competing in the exciting Formula E racing league to add to their racing credentials. Unfortunately, things haven't turned out quite so well for Nio since their electric start.
Nio have incurred more than $5 billion over the last four years, it took Tesla around 14 years to achieve the same figure! That doesn't make for very good reading if you're a Nio investor. To top that, the company also had to recall near 5,000 cars last year because a short circuit issue with the batteries meant there was a danger of fire. That recall cost them around $49m. They also recently sold their ill-fated Formula E team to Lishen Racing, the team had a disastrous campaign last season. Along with this, Nio employ around 9,900 people for which they host lavish parties to help keep the staff energized.
Above: Nio's ES8 luxury SUV
Where did it all go wrong for Nio?
Things weren't going so badly for Nio until recently as they were making use of a Chinese governmental subsidy that reduces costs for young Chinese companies that have the capability to be globally competitive. However, the subsidy only lasts for five years and Nio have come to the end of the road in that sense. What hasn't helped their case is the fact that Chinese EV sales have been dwindling over the last few years after the government reduced an EV rebate. Another worry for the company is that they have reached the end of their subsidy period without having a factory in place, they instead contract the manufacturing of their cars to JAC motor. They also haven't been able to cover their costs in the last four years. This has all been made worse by Nio's heavy spending on research and development which has costed them over $600 million in the second quarter of this year!
What does the future hold?
Nio have proved that they can make good cars in the form of the ES6, ES8 and EP9 but their poor financial planning has finally caught up with them. Another shocker was when news broke that their CFO (chief financial officer) had resigned with immediate effect. This came as a shock to the company and investors, Nio then had to hire a new CFO rather quickly. Those chose a local automotive analyst to replace their outgoing CFO. We will wait to see what happens with the company as the new CFO has a big task ahead of him in terms of sourcing financing for the company. His worries continue as shares have tanked by over 70% in the last year alone and Nio have had to lay off over 2,000 employees this year.