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Nio loses another US$2.9 billion as China's EV battle heats up

Bloomberg • 4 min read
Nio loses another US$2.9 billion as China's EV battle heats up
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Nio Inc’s annual loss widened last year as the Chinese electric-vehicle maker faced fierce competition in the world’s biggest EV market.

The Shanghai-based company’s net loss of 5.4 billion yuan in the fourth quarter brought its annual deficit to 20.7 billion yuan (US$2.9 billion), according to a statement Tuesday. Nio posted better-than-expected sales for the final three months of 2023.

“Moving into 2024, we will prioritize our business objectives, improve system capabilities and optimize cost management,” Nio Chief Financial Officer Steven Feng said. While vehicle margins improved to 11.9% in the fourth quarter, that was still below analyst expectations.

Nio Lost Another US$2.9 Billion Last Year | The Chinese EV maker has never been profitable

Unlike rivals Xpeng Inc and Li Auto Inc, which is now making money, Nio hasn’t announced any major product launch plans for 2024. The automaker, which has a line up of mainly premium sport utility vehicles and sedans, is however expected to unveil a mass-market brand that would compete with Tesla Inc.’s locally built models — a move analysts say may help stem losses.

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Nio now expects to ship as many as 33,000 cars in the first quarter, down from 50,045 vehicles in the previous three-month period. The company’s deliveries last year weren’t even two-thirds of its original sales target.

Gross margins for the fourth quarter came in at 7.5% compared to the 10.2% the market was looking for. Nio now sees revenue of as much as 11.1 billion yuan for the current quarter, significantly below analyst expectations.

Once considered one of the brightest rising stars in China’s EV market, Nio has struggled of late, last year receiving a capital injection in the form of a just-in-time share sale to CYVN Holdings LLC, an investment entity controlled by the government of Abu Dhabi. The June US$738.5 million cash infusion may only last a short while at current burn rates.

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Nio’s mass market brand Alps will start deliveries in the fourth quarter, Chief Executive Officer William Li said during an earnings call Tuesday. Its first model will come with a swappable battery and compete with Tesla’s Model Y SUV, while the second model has been developed for larger families. With an output of around 10,000 units per month, Alps’ first product will have a 10% lower manufacturing cost than the Model Y, the CEO said.

The main Nio brand will maintain its focus on premium cars and only offer models with priced above its 298,000 yuan ET5 sedan, Li said, adding that Alps will prioritize volume. The company also plans to launch an even cheaper sub-brand in 2025, with vehicles priced below 200,000 yuan. Nio is also expanding in the United Arab Emirates.

In November, Nio trimmed around 10% of its workforce and the carmaker has considered spinning off some non-core businesses to reduce costs. In December, it signed a deal for a US$2.2 billion cash injection again from CYVN Holdings. Upon completion, CYVN will own a 20.1% stake in Nio and can nominate two board directors.

The automaker also entered into a technology license agreement last month with a subsidiary of CYVN to grant a non-exclusive and non-transferrable worldwide license to Nio’s existing and future technical information, technical solutions, software and intellectual property rights, it said in the statement. 

Nio is aggressively promoting its battery-swap technologies, partnering with a handful of Chinese automakers including Geely Automobile Holdings and local authorities in Anhui province, where Nio’s factory is based. EVs using battery-swap technology can be driven into a booth where the depleted cell is replaced with a charged one in a matter of minutes, reducing driver concern about range and charging times.

Nio’s US-listed shares are down 41% this year; its SGX-quoted shares are down 38.88% year to date to trade at US$5.44 on March 5.

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