Shanghai-based Nio is set to report on Tuesday that it lost a further 2.6 billion yuan (about $ 369 million) in the second quarter - about $ 4 million a day, according to average analyst estimates. This will put the company, backed by Internet giant Tencent Holdings, in cumulative losses of about $ 5.7 billion since William Lee Bin founded the electric car company in 2014.
Cost overruns, weak sales, and large recalls due to defective batteries have driven Nio's market value down 74 percent from a record $ 11.9 billion it hit a year ago. This raises concerns that Chinese electric vehicle (EV) production is a bubble that could burst.
Overall sales of electric vehicles in China, where half of the world's EVs are sold, began to decline after the government cut subsidies for electric vehicles to help the industry get back on its feet and avoid a bubble.
The liquidity crisis intensifies in Nio. The automaker is set to slash its workforce by 14 percent to 7,500 by the end of this month, the company said. Battery fire or smoking incidents forced Nio to recall about 4,800 vehicles - more than 20 percent of all EVs sold. This resulted in lower shipments in the second quarter.
The company also scrapped plans to build a plant in Shanghai and instead outsource production of its ES6 and ES8 vehicles to Anhui Jianghuai Automobile Group.
A major concern for Nio is Tesla, which plans to begin production of EVs in China later this year, which will allow the American company to lower the prices of its electric vehicles sold in the country.
“Nio mis-positioned itself in the marketplace,” said Yale Zhang, founder and CEO of consulting firm AutoForesight. “Therefore, I am not optimistic about her future.”
