Nio reported a bigger-than-expected loss in the first quarter as increased competition dealt the electric-vehicle maker another setback in its push for profitability.
The manufacturer’s adjusted net loss widened to 4.9 billion yuan ($677 million) in the period, the EV maker said Thursday.
Nio has had a slow start to the year and in March cut its vehicle delivery guidance.
Nio is facing challenges including fiercer competition in China, where a price war is raging. Expansion in more profitable overseas markets is facing headwinds too, with tariff hikes in the U.S. and the European Union on the horizon or already underway.
Margin improvements
Nio focused on the premium segment following its founding in 2014, with high-end club-like showrooms dubbed Nio Houses and cost-heavy battery-swapping operations.
Since then the company has reined in spending, slowed its overseas expansion and cut jobs over the past year.
Kerrigan Advisors’ proprietary annual OEM Survey of over 100 executives reveals that the majority of respondents are worried about the financial impact of Chinese automakers’ growing global market share, and most expect that the EV transition to be slower than expected. The survey also queried executives on their outlooks for dealership valuations and profitability, as well as their expectations for the future of dealer networks and facility requirements.
The changes have improved its margins. Gross margin recovered to 4.9 percent in the first quarter, from 1.5 percent in the same period last year.
Nio also was among EV makers including Xiaomi and BYD that reported strong sales in May, with deliveries for the company surging more than 230 percent.
Now the company is betting on a mass-market second brand, called Onvo, which aims to take on Tesla’s locally built models.
The first cars will be delivered in September, with the subbrand expected to contribute to profitability once deliveries hit 20,000 units a month.
Meanwhile, Nio continues to upgrade existing models and is partnering with other automakers in battery swap networks.
It expects to deliver as many as 56,000 vehicles in the three months ended June 30, generating revenue of as much as 17.1 billion yuan, it said in a statement.
In the first quarter, deliveries declined to 30,053 vehicles, broadly in line with the company’s revised target. Revenue fell to 9.9 billion yuan, also missing analyst estimates.
To support a predicted rise in demand for its main brand and Onvo, Nio has started construction of a third factory, according to a statement.
Based in Hefei in central China, the new plant is expected to add annual capacity of 100,000 vehicles per shift.
The Nio Power unit secured an investment of 1 billion yuan in exchange for 10 percent equity interest last month. It’s open for additional external financing, group CEO William Li said during a call with analysts.
The company will as soon as in the first half of next year start deliveries of the first model of its third brand, dubbed Firefly, which is preparing vehicles with swappable batteries costing between 100,000 yuan and 200,000 yuan.
Li said the European Union’s probe into Chinese EV subsidies — which may result in tariffs — is going “in a substantially wrong direction.”
While Nio’s current European sales account for just a small share of its overall deliveries, the company will adjust its overseas push according to any tariff changes and also start expanding to the Middle East later this year.
