Why Is Nio Struggling?

Matt Posky
by Matt Posky
why is nio struggling

Nio, one of China’s biggest EV startups, is confronting difficult times, though the primary reasons for its plight are less than obvious. Automotive startups have a low survival rate, but Nio was presumed to be the next big thing in vehicular electrification. It looked poised to become one of the few EV companies that would survive in Asia, likely serving as China’s response to Tesla, and even had a successful Formula E racing team to showcase its engineering might.

We sad had because Nio sold that team this year. It also needed to recall 4,800 vehicles after reports of three catching fire, endured a sizable sales drop, witnessed its share price plummet, announced plans to layoff 10 percent of its workforce, and just lost one of its co-founders.

While few automakers are truly thriving right now, Nio’s issues seem more serious than the status quo. Yet the root causes may still be the same. Global demand is down but, as the world’s largest market, China is causing the most headaches. It’s still pushing expensive new energy vehicles and stringent emission mandates and cut government subsidies at the same time its economy started tanking. For Nio, that meant car deliveries halved in the last quarter — losing it $390 million.

The company informed the Financial Times that it would be forced to cut 1,000 positions worldwide this year (about 10 percent of its workforce) as a result. Nio previously announced it had exercised 70 employees across two Silicon Valley offices, one of which ended up closing, in May. Among those disappearing this year is company founder and former executive vice-president Jack Cheng, who left his post on Wednesday. The official reason from the manufacturer? At 61 years of age, he was too old.

From the Financial Times:

Nio said Mr Cheng had been responsible for vehicle development, supply chain management, and manufacturing. “We thank him for his long-term hard work and dedication,” it added.

Mr Cheng’s exit follows a series of high-level departures from Nio. Li Zhang, the company’s former head of software, and Angelika Sodian, who headed Nio’s operations in Britain left the company in June. US chief executive Padmasree Warrior left at the end of last year.

Nio raised $3.9bn in venture-capital funding in addition to its IPO, but has been forced to cut staff and sell assets this year due to continued losses, which amounted to $390m in the most recent quarter.

With trade conflicts unlikely to subside for some time and China’s emission requirements leaving consumers and factories about 1 percent of its EV startups survive, we all just thought Nio would be one of them.

Has the company been mismanaged, dumping too much cash into side projects (like customer clubhouses and a branded clothing line), or is this simply a case of China being caught overplaying its hand in the midst of a trade war? Perhaps it’s the emissions issue. We know that the government’s aggressive push to promote new energy cars has spooked buyers and burgeoning ride-hailing services have made ownership less popular in cities where consumers have the most spending money.

Odds are good that it’s all of the above, at least to some degree. Unfortunately, that gives Nio more to contend with as it attempts to correct its course — some of which it may have to leave to the Chinese government.

[Images: Nio]

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  • Pdl2dmtl Pdl2dmtl on Aug 15, 2019

    Who wrote this bloody article? Checked for spelling and grammar much? Oh, I know - Google translate....

  • HotPotato HotPotato on Aug 19, 2019

    China is committed to world leadership in several key sectors and the EV sector is one of them. If this is truly a leading company, they won't let it fail.

  • Darren Mertz In 2000, after reading the glowing reviews from c/d in 1998, I decided that was the car for me (yep, it took me 2 years to make up my mind). I found a 1999 with 24k on the clock at a local Volvo dealership. I think the salesman was more impressed with it than I was. It was everything I had hoped for. Comfortable, stylish, roomy, refined, efficient, flexible, ... I can't think of more superlatives right now but there are likely more. I had that car until just last year at this time. A red light runner t-boned me and my partner who was in the passenger seat. The cops estimate the other driver hit us at about 50 mph - on a city street. My partner wasn't visibly injured (when the seat air bag went off it shoved him out of the way of the intruding car) but his hip was rather tweaked. My car, though, was gone. I cried like a baby when they towed it away. I ruminated for months trying to decide how to replace it. Luckily, we had my 1998 SAAB 9000 as a spare car to use. I decided early on that there would be no new car considered. I loathe touch screens. I'm also not a fan of climate control. Months went by. I decided to keep looking for another B5 Passat. As the author wrote, the B5.5 just looked 'over done'. October this past year I found my Cinderella slipper - an early 2001. Same silver color. Same black leather interior. Same 1.8T engine. Same 5 speed manual transmission. I was happier than a pig in sh!t. But a little sad also. I had replaced my baby. But life goes on. I drive it every day to work which takes me over some rather twisty freeway ramps. I love the light snarel as I charge up some steep hills on my way home. So, I'm a dyed-in-the-wool Passat guy.
  • Paul Mezhir As awful as the styling was on these cars, they were beautifully assembled and extremely well finished for the day. The doors closed solidly, the ride was extremely quiet and the absence of squeaks and rattles was commendable. As for styling? Everything's beautiful in it's own way.....except for the VI coupe....it's proportions were just odd: the passenger compartment and wheelbase seemed to be way too short, especially compared to the VI sedan. Even the short-lived Town Coupe had much better proportions. None of the fox-body Lincolns could compare to the beautiful proportions of the Mark V.....it was the epitome of long, low, sleek and elegant. The proportions were just about perfect from every angle.
  • ToolGuy Silhouetting yourself on a ridge like that is an excellent way to get yourself shot ( Skylining)."Don't you know there's a special military operation on?"
  • ToolGuy When Farley says “like the Millennium Falcon” he means "fully updatable" and "constantly improving" -- it's right there in the Car and Driver article (and makes perfect sense).
  • Master Baiter New slogan in the age of Ford EVs:FoundOnRoadDischarged