By on September 24, 2019

Despite assuming the role of one of China’s most promising electric vehicle startups, NIO is struggling. The first quarter of this year was a mess. Worried about bad publicity stemming from battery fires, NIO recalled 4,800 vehicles ⁠— more than it sold in Q1. It also endured a noteworthy sales decline, a drop in share price, sold off its Formula E racing team, and announced it would cut around 10 percent of its workforce.

The situation has not improved for Q2. According to reports from the manufacturer, losses expanded 83.1 percent from the previous year to about 3.3 billion yuan ($463 million). Despite NIO’s recent addition of the ES6 crossover, Q2 sales were down 7.9 percent from Q1 ⁠— resulting in a grand total of 3,553 deliveries. NIO now believes it will have to sheer 20 percent of its workforce to save costs.

It’s difficult to tell whether NIO is experiencing growing pains synonymous with automotive startups or if it’s actually spiraling out of control. Don’t forget there were years when we thought Tesla Motors was a dead brand walking, too.

NIO is a little different, however. Whereas Tesla took almost a decade to begin producing vehicles at a scale similar to the Chinese manufacturer’s present-day abilities, NIO has only been around since 2014. As it turns out, that explosive growth may have been unstable. Still, not every problem can be placed upon NIO’s doorstep.

China is busy withdrawing subsidies at a time when EV sales are already on the decline in Asia. As a result, most of the region’s EV companies are having a tougher time this year. According to Automotive News, this has shaken public confidence in the electric vehicle industry ⁠— especially NIO.

From Automotive News:

The results help illustrate why cost overruns, weak sales, and major recalls have led NIO shares to fall 77 percent since its market value hit a record $11.9 billion about a year ago. More broadly, the company’s reversal of fortune illustrates why concerns are mounting that China created an electric-vehicle bubble that may be about to burst.

“People are wondering whether the company can continue to survive,” said Jason Chen, an analyst from Blue Lotus Capital Advisors Ltd. “Not many people care about delivery figures anymore.”

NIO shares fell 19 percent to $2.20 in early trading on Wall Street.

The company, which is backed by technology giant Tencent Holdings Ltd., has accumulated about $6 billion in losses since it was founded by William Li in 2014. Fire risks led to a mass recall of nearly 5,000 vehicles in June, a significant portion of the total 17,550 the company had ever sold as of the end of May.

While NIO canceled the typical earnings conference call that occurs after financial results are announced, Li stated on Monday that that the company’s staff would need to be reduced by about 2,100 heads this year. NIO had just under 10,000 employees at the start of January. Li also said that the company will need to undertake additional restructuring measures, including spinning off non-essential businesses.

[Image: Sundry Photography/Shutterstock]

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10 Comments on “NIO Cutting 20 Percent of Its Staff After Dismal Q2...”

  • avatar

    EVs can only survive as long as there is money being diverted from profitable uses. Parasites need robust hosts.

    • 0 avatar
      SCE to AUX

      It’s a startup, and most of them fail, having burned lots of investor money. I’ve seen more pizza shops fail than EV companies.

      • 0 avatar

        Is Tesla a start-up? Porsche-VW? How many startups are startups after twenty to eighty years?

        • 0 avatar
          SCE to AUX

          Tesla is not a startup.

          Nio’s problems have more to do with it being a startup than the fact that they are in the EV business.

          I was part of a 20% RIF from a startup in 2003, thanks to a crowded computer server market. That doesn’t mean the server business is inherently faulty.

    • 0 avatar

      In the US maybe, in places where gasoline / diesel cars are taxed massively, they may survive if they are taxed less.

      Now startup in general, on the other hands……

      • 0 avatar

        Lower taxes worked for diesels, which are just dirtier, lower performing internal combustion engines. EVs need constant subsidies from self-sustaining technologies. That’s why they’ve spent a hundred years on the ash-heap of history. People who think they’re smarter than markets should be institutionalized, not obeyed.

  • avatar
    SCE to AUX

    Repeating my comments from the last article on this subject:

    I’m not sure why Nio’s travails are noteworthy here, except that it’s EV clickbait.

  • avatar

    Might people actually be saving up for later, because they’re going to be forced into a glorified golf cart at a later date because their government is putting the kibosh to ICE vehicles?

  • avatar

    “staff would need to be reduced by about 2,100 heads this year. ”

    I hope they do not mean it literally – it brings back horror scenes of mass beheadings of “state criminals” on stadiums in China during Cultural revolution.

  • avatar

    OK I will click the bait

    Whether EVs will thrive on their own remains to be seen but like many incubator industries one sees lots of:

    Wishful thinking
    Unrealistic goals
    Self promotion
    Rent seeking
    Corporate welfare

    But in the end you cannot avoid the impact of Gravity, Physics or Economics.

    Going forward maybe only the 1% will be able to afford “personal” mobility solutions.

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