In Depth: EV Upstart Nio Going Nowhere Fast

Nio Inc., a Chinese electric vehicle (EV) company, is facing challenges due to persistent losses, soaring operating costs, and intensifying industry competition. Despite delivering 221,970 vehicles in 2024, a 38.7% year-on-year increase, Nio’s net loss widened by 8.1% to approximately 22.4 billion yuan ($3.1 billion) [para. 1][para. 3]. The company’s founder and CEO William Li acknowledged missteps and vowed to address them by investing in crucial areas [para. 2].

To address financial challenges, Nio announced plans to raise around HK$4 billion ($514 million) by issuing 136.8 million shares at a discounted price. The proceeds will fund research and development in smart EV technologies and new products [para. 4]. While Nio struggles with losses, some competitors like Li Auto Inc. and Zhejiang Leapmotor Technology Co. Ltd. have recently reported profits, indicating stiff competition in the market [para. 5].

In 2024, Nio averaged selling 18,498 vehicles per month, which some analysts argue is below the threshold required for sustainability in China’s competitive EV sector [para. 6]. The company’s current lineup includes the Nio, Firefly, and Onvo brands, with the latter marketed as budget options [para. 7]. However, sales of the midsize L60, Onvo's first model launched in September 2024, initially surged but have since declined due to production and marketing challenges, battery supply issues, and pricing strategies [para. 9][para. 10][para. 12][para. 14].

The company’s battery supply struggles mainly stem from supplier preferences and underestimated production capacity, which have led to order cancellations [para. 11][para. 13]. Additionally, the limited number of battery-swapping stations further complicates matters, although Nio has signed station-sharing agreements with other automakers to mitigate the issue. Streamlining battery compatibility across brands remains another hurdle [para. 16][para. 17].

Operating costs have surged due to Nio’s positioning as a premium brand and investments in Nio Houses, which serve as community hubs for brand engagement [para. 20][para. 21][para. 22]. Battery-swapping stations also add to expenses, with plans to build 1,900 stations in 2025 at an estimated cost of nearly 3 billion yuan. Since its founding, Nio has spent over 50 billion yuan on R&D, surpassing rivals Li Auto and XPeng [para. 24][para. 26].

In an effort to control costs, Nio reduced unprofitable ventures, like its plan to make a companion smartphone for vehicles, and downsized its workforce by not renewing contracts or outright layoffs [para. 28]. Concurrently, the company steps up funding efforts, securing a 2.8 billion yuan investment from entities controlled by Anhui’s provincial government, with financial backing from key investors like Tencent Holdings, Baidu Inc., and Temasek Holdings [para. 29].

In response to increased competition, Nio extended its policy of five-year interest-free loans on Nio-branded vehicles to keep pace with rivals. The SUV ES6, Nio’s popular model, faces competition from Xiaomi’s YU7, which is priced lower. Smart EVs are the latest competitive focus in the world’s biggest auto market, prompting Nio to enhance its Navigation on Pilot (NOP) feature [para. 31][para. 33][para. 37]. Despite challenges, Nio strives to adapt by investing in smart driving technology and optimizing its operations [para. 39].