NIO Death Watch: Chinese EV Company About to Bite the Dust
With the way China organized its great leap forward into electrification, we knew it would bury hundreds of automotive startups in the process. By propping up countless businesses, China ensured it could boast more new EV manufacturers than any other nation on the planet. Yet most industry watchers presumed there would be a low survival rate once these fresh firms attempted to transition into legitimate automakers. Some analysts predicted only 10 percent would still be in operation by 2023, while others said 1 percent was probably more realistic.
While this trial by fire seemed poised to weed out lesser-known companies, we’ve seen major players struggling of late. One of them is NIO — a company broadly viewed as a Tesla rival, but which is probably most famous for building the EP9 electric hypercar that traveled the globe to smash EV records in 2017. NIO had a tough 2019, posting a $479-million loss during the second quarter and announced the elimination of 2,000 employees — that’s after it sold its Formula-E team, closed an office in California, abandoned at least one planned factory, and ditched one new model mid-development.
The company now openly acknowledges that it might not survive through 2020.
NIO had a cash balance of $151.7 million at the end of last year; then the Chinese government finally got around to announcing there was a vicious new virus sweeping the country and the whole auto industry shut down. In January, new vehicle sales dropped 18 percent in China while EVs and NEVs (“new-energy” vehicles) contracted by over 54 percent. While the coronavirus is an ongoing concern for the industry at large, Chinese auto sales were already losing steam. Its government also cut subsidies on EVs by 50 percent last June as new emission regulations were enacted.
This left NIO in a bad situation, one made all the more worse by a viral outbreak that’s guaranteed to suppress 2020 sales volume by a large degree. According to Automobilwoche, the company confessed that its current financial situation can’t “guarantee the necessary liquidity for continued operations in the next 12 months” last Wednesday. NIO likely needs to see some sizable investments roll in, and soon, to keep it afloat, though that seems unlikely given the current state of things. The company’s share price has trended downward since March of 2019. It lost half its value in that month alone and now trades at just a quarter of its peak valuation at $2.24 a share.
Unless William Li (Li Bin), chairman and CEO of NIO, intends on dumping more of his wealth into the company to keep it afloat, the party looks ready to end relatively soon. Even if the company sees a cash injection that helps it through 2020, there’s nothing to guarantee it’ll make a legitimate comeback.
[Image: Sundry Photography/Shutterstock]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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It is not really about EV industries but rather the whole startup scene is coming to an end with the recession we are already in.
I was surprised to see how Saab went out. It kept getting to be more and more like Opel and was sure it was going to end up being the Swedish Opel (sort of like how Vauxhall ended up being the British Opel). Saab Insignia anyone? Saab Astra?