A dismal future for NIO, once the darling of China’s electric vehicle market?

NIO, one of China’s leading electric vehicle companies, is in serious trouble. Its shares plummeted by 25% from opening price by Wednesday midday after the company released worse than expected Q4 2019 losses and announced it was running low on cash. The key takeaways from NIO’s full (unaudited) 2019 report include:

  • Increase in vehicle sales by 51.8% from 2018.
  • Vehicle margin of negative 9.9% compared with 1.6% in 2018. In other words, every $1 of vehicle sales costs the company $1.099.
  • Revenue increase of 58% from 2018.
  • 15.5% increase in loss from operations from 2018.
  • Net loss representing a 17% increase from 2018’s net loss.

None of this is good: NIO is losing more money on every vehicle it sells than it did in the past. And as of December 31, 2019, NIO only had $161.7 million in cash. So the company raised more funds in February and March 2020 by making “several private placements of convertible notes” amounting to $435 million in aggregate principle to support development and daily business operations. NIO is also in talks with the municipal government of Hefei, which plans to provide financial support for NIO in exchange for the company establishing headquarters in Hefei. Talks are ongoing with legally binding agreements coming soon, said NIO’s CEO, William Bin Li. But how long can NIO continue to seduce investors while hemorrhaging cash?

The coronavirus outbreak has further dampened NIO’s prospects. The company expects vehicle deliveries to be between 3,400 and 3,600 in Q1 2020, less than half of the numbers for Q4 2019. Revenue is also expected to decrease 55.3–57.6% from Q4 2019 to Q1 2020.  

Total vehicle sales in China fell 18% in January, and electric battery vehicle sales fell 54.4%, per Reuters. All car companies have been impacted, but NIO’s financial situation is particularly dismal, while competitors like Tesla are flush with cash. NIO’s future is uncertain, to say the least.  

See also on SupChina: Will NIO survive long enough to reap China’s electric car rewards? (January 23).

—Caroline Stetson