HomeBusinessNio stands to lose another $2.9 billion as China's EV battle intensifies

Nio stands to lose another $2.9 billion as China’s EV battle intensifies

(Bloomberg) — Nio Inc.’s annual loss expanded last year as the Chinese electric vehicle maker faced stiff competition in the world’s largest EV market.

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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 ($2.9 billion), a statement said Tuesday. Nio posted better-than-expected revenue for the final three months of 2023.

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

Unlike rivals Xpeng Inc. and Li Auto Inc., which are now making money, Nio has not announced any major product launch plans until 2024. However, the automaker, which has a lineup of mostly premium SUVs and sedans, expects to unveil a mass-market brand that would compete with the locally built models of Tesla Inc. – a move that analysts say could help limit losses.

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Nio now expects to ship as many as 33,000 vehicles in the first quarter, up from 50,045 vehicles in the previous three-month period. The company’s deliveries last year were not even two-thirds of the 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 expects revenue of as much as 11.1 billion yuan for the current quarter, significantly lower than analyst expectations.

Once considered one of the biggest rising stars in the Chinese EV market, Nio has struggled lately. Last year, he received 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 China. Abu Dhabi. The $738.5 million cash injection in June may only last a short time at current burn rates.

Nio’s mass-market brand Alps will begin shipping in the fourth quarter, Chief Executive Officer William Li said on an earnings call on Tuesday. The first model comes with a swappable battery and competes with Tesla’s Model Y SUV, while the second model is designed for larger families. With production of about 10,000 units per month, Alps’ first product will have 10% lower production costs than the Model Y, the CEO said.

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The flagship Nio brand will continue to focus on premium cars and only offer models priced above the 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 under 200,000 yuan. Nio is also expanding in the United Arab Emirates.

In November, Nio cut about 10% of its workforce and the automaker has considered divesting some non-core businesses to reduce costs. In December, it signed another deal for a $2.2 billion cash injection from CYVN Holdings. Upon completion, CYVN will own a 20.1% stake in Nio and can appoint two board members.

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

Nio is aggressively promoting its battery swapping technologies in partnership with a handful of Chinese automakers, including Geely Automobile Holdings Ltd. and local authorities in Anhui province, where Nio’s factory is located. EVs that use battery swapping technology can be driven to a cabin within minutes where the empty cell is replaced with a charged one, reducing driver concerns about range and charging times.

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Nio’s US-listed shares are down 41% this year.

—With help from Craig Trudell.

(Updates with information about the Nio’s Alps brand in section 8.)

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