China’s Tesla Rival Nio Tumbles on Widening Losses
New York-listed shares of Chinese Tesla wannabe Nio Inc. tumbled as much as 26% Tuesday morning after the electric carmaker reported a worse-than-expected quarterly loss, reflecting slowing sales, overspending and major recalls.
Nio Tuesday reported a 3.3 billion yuan ($462 million) net loss for the second quarter, 25% wider than the previous quarter and nearly double the loss for the same period last year. Vehicle sales fell nearly 8% to 1.41 billion yuan from 1.54 billion yuan the previous quarter.
A Bloomberg survey of analysts estimated an average estimated loss of 2.6 billion yuan for Nio’s second quarter. The company canceled an earnings call scheduled for Tuesday.
Annual losses for Nio, backed by technology giant Tencent Holdings Ltd., expanded from 2.6 billion yuan in 2016 to 9.6 billion yuan in 2018. Bloomberg reported that Nio has accumulated more than $5 billion of losses since its business inception four years ago, a figure it took Tesla 15 years to pass.
Nio started to deliver vehicles last year and currently has two models available on the market. By the end of June, the company sold 18,800 of its flagship ES8 SUVs and 2,883 ES6 SUVs.
A battery fire incident earlier this year led to a recall of 4,803 ES8 vehicles in June. Nio said the recall resulted in 340 million yuan of costs for the company and pushed up its second quarter sales costs by 8.8% from the previous quarter to 2 billion yuan.
The recall also led to slower sales of new cars, Nio said. The company delivered only 837 new vehicles in July, nearly 40% less than its average monthly sales of 1,327 during the first quarter. Sales revived in August to 1,943.
Nio had a balance of cash and cash equivalents, restricted cash and short-term investments totaling 3.45 billion yuan as of June 30, the financial report showed.
For the third quarter, Nio projected vehicle deliveries of 4,200 to 4,400 units, representing an increase of 18.2% to 23.8% from the second quarter. Total revenue is expected to range between 1.59 billion yuan and 1.66 billion yuan, rising 5.6% to 10.3% from the second quarter, the company said.
Market concerns over Nio’s financials have increased since August when the company sold its Formula E team to Shanghai-based car-racing company Lishen. The company borrowed $650 million through a dollar-based convertible bond sale in February and said in May it secured an investment of more than 10 billion yuan from a Beijing-based state enterprise.
Nio founder William Li said in a Tuesday statement that the company is set to slash its global headcount to 7,800 by the end of the third quarter from more than 9,900 in January. The job cuts will mainly affect noncore business departments including legal affairs, financial and human resources, Li said.
By the end of the year, Nio will spin off some noncore businesses to improve its operational efficiency, Li said, without giving details.
China’s electric vehicle market, the world’s largest, is showing cooling signs after years of rocketing growth. Total sales fell for the first time in July after the government scaled back subsidies. Deliveries dropped again in August amid a broader slowdown in the auto market.
Nio stock has dropped more than 70% since it listed on the New York Stock Exchange last year in a $1 billion initial public offering
Contact reporter Han Wei (firstname.lastname@example.org)
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