Once hailed as the ‘Tesla killer of China’, an electric car startup is burdened with $ 2 billion in debt, difficult to break even until 2024

The day NIO introduced a sports utility vehicle in 2017 with a sleek design, large screen and a range of voice control features, the company was hailed as “China’s Tesla killer”.

Now, when the electric vehicle market is filled with challenges in both price and style, NIO struggles with its own shadow. Sales have fallen in recent months, forcing the company to “tighten its belts”. CEO William Li also affirmed that NIO needs to be more cautious because cash flow has been affected.

However, with the backing of an Abu Dhabi government organization that has committed to invest about $740 million, NIO expects sales to begin to recover in June, after the company launches an improved SUV line-up.

NIO lags behind other automakers in the discount campaign. The recent move shows that carmakers’ profits are severely damaged amid supply chain disruptions. Some startups had to accept bankruptcy due to weak sales.

Earlier this year, indebted WM Motor suspended most of its production and laid off employees because it ran out of cash. Letin Auto, the brand best known for its $4,000 electric hatchback, also filed for bankruptcy in May after failing to turn a profit.

Xpeng, a famous EV startup listed in the US, has also recorded a steady decline in sales since September last year despite launching many discount programs and improving models. The number of fast delivery vehicles decreased by nearly 40% compared to the same period last year.

Once a destination for investors looking for the next Tesla, global electric vehicle companies are struggling with tight liquidity. Several American brands, including Rivian Automotive and Lucid Group, are also among those facing tough times.

“Not everyone can survive in the market,” said Joel Ying, an analyst at Nomura, adding that startups are more vulnerable than traditional automakers.

According to the WSJ, Beijing officials are finalizing measures to stimulate the economy. The finance ministry last week extended tax exemptions for electric and hybrid vehicles through the end of 2025.

The Chinese market is becoming more challenging, not only for domestic brands but also foreign ones. Long-standing automakers like Ford have also failed, while Volkswagen has not yet made it into the top 10 best-selling EVs.

Tesla currently ranks 2nd in the Chinese electric vehicle market. It sold more than 200,000 units to locals in the first five months of this year, while China’s largest electric vehicle maker BYD, backed by Warren Buffett, sold about 900,000 units, including hybrids. . Li Auto, which makes expensive hybrids, delivered more than 100,000 vehicles in the same period.

Since the beginning of the year, dozens of car manufacturers in China have had to reduce selling prices, including Tesla. Many competitors, including XPeng and BYD, have no choice but to join the price war.

NIO is out of the game. The company in April and May saw the number of fast-delivery vehicles plummet to about 6,000 units from a peak of 10,000 in the previous months. According to experts, the problem of NIO is quite complicated because the brand is too slow in launching new models.

Falling sales have affected the company’s profitability. As of the end of March, NIO’s cash and other short-term liquidity was down 30% to just $5 billion from a year earlier, while liabilities stood at $2 billion. According to the NIO CEO, the company will hardly break even until at least the end of 2024, which is a year later than the previous forecast. It has also delayed investment in fixed assets and some research.

Earlier this month, NIO decided to reduce the price of all models available in China to $4,200. The Shanghai-based startup also allows buyers to buy cars without batteries — one of EV’s most expensive components — and sign up for a free battery replacement program.

“ Together with highly competitive products, flexible car charging, battery exchange and rental policies, we will change the landscape of the electric vehicle industry. Our commitment to the region marks a new chapter in our global growth ,” emphasized NIO CEO.

Tu Le, managing director of Sino Auto Insights, which specializes in research on the Chinese auto industry, said the discount program will temporarily boost sales, but NIO may have to adjust its strategy. and your product if you want to win.

Previously, NIO revealed plans to expand the market in European countries, respectively Germany, the Netherlands, Denmark and Sweden. Putting Germany in one of the destinations and being ready to compete with “big guys” like Mercedes, BMW, Audi right at home shows that NIO puts great determination in conquering a difficult market.

By: WSJ, Bloomberg