NIO reported a bigger-than-expected loss in the first quarter, highlighting how increased competition in the electric vehicle market is making it more difficult for the company to become profitable.
The Shanghai-based EV maker’s adjusted net loss grew 18.1 per cent to 4.90 billion yuan (S$911.7 million) in the first quarter, according to a company statement on Thursday (Jun 6). That was wider than analysts’ estimate of a 4.39 billion yuan loss.
Nio indicated in March that it was facing a difficult quarter when it cut guidance for deliveries to 30,000, down from its previous estimate of 31,000 to 33,000 for the first three months of the year. In the end, they slowed 3.2 per cent to 30,053 vehicles, with revenue falling 7.2 per cent to 9.9 billion yuan. Analysts expected revenue of 10.8 billion yuan for the quarter.
Shares fell as much as 7.4 per cent in pre-market trading.
2024 represents a key year in Nio’s efforts to become profitable. It’s facing a range of challenges, including fiercer competition in its home market as EV makers cut prices and launch new models in an attempt overcome a slump in consumer spending. Outreach in more profitable overseas markets is facing headwinds too, with tariff hikes in the US and the European Union on the horizon or already underway.
Margin improvements
After focusing on the premium market following its founding in 2014 with high-end club-like showrooms – dubbed Nio Houses – and cost-heavy battery-swapping operations, the company has reined in spending, slowed its overseas expansion and cut jobs over the past year.
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The changes have improved its margins. Gross margin recovered to 4.9 per cent, from 1.5 per cent in the same period last year.
There are other signs of improvement. Nio was among several EV makers, including Xiaomi and BYD, to report strong sales in May, with deliveries for the company surging more than 230 per cent.
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 sub-brand expected to contribute to profitability once deliveries hit 20,000 units a month.
Meanwhile, Nio continued to upgrade existing models and partnered with other automakers in battery swap networks. It expects to deliver a total of between 54,000 and 56,000 vehicles in the three months ended Jun 30, generating revenue of up to 17.1 billion yuan, it said in the statement.
To support a predicted rise in demand for its main brand and Onvo, Nio has started construction of its third factory, according to a company statement on Thursday.
Based in Hefei in central China, the new plant is expected to add annual capacity of 100,000 vehicles per shift. BLOOMBERG