BEIJING (Reuters) – China’s loss-making Tesla wannabe Nio Inc. will be expanding its store network with smaller displays, slash its workforce and spin off a number of business units, company executives said on Wednesday, in a bid to take control of the massive cash burn in the midst of the slowing down of electric car sales in the world’s biggest auto market.
The Chinese electric-car start-up, Nio, Inc. the logo can be seen on the initial public offering (IPO) a day on the new york stock exchange in New York, New York, united states of america, September 12, 2018. REUTERS/Brendan McDermid
In an unusual move, Nio canceled a scheduled earnings conference call on Tuesday. However, the opposition of the phone call on the Wednesday following the end of the voting shares of the company touched a low of $1.97. The company is one of the most notable among the dozens of Chinese electric-car start-ups, in the hope of emulating the Model reported in the second quarter, and a net loss of $478.6 million, up 25.2% compared to the first quarter loss, after the removal of the 4,803 vehicles in the month of June.
Nio’s sales were down by 8 per cent to 1.41 billion yuan ($198.40 million) from 1.54 billion yuan in the previous quarter. Nio is sold 3,140 ES8 cars, from 3,989 in the first quarter of the year. It is sold only 413 of cheap ES6 model.
William Li, founder and chief executive of the young, a Shanghai-based electric-car maker’s debt from the company’s disappointing performance, at a reduction of the EV subsidies and incentives, as well as settle a luxury-car demand in the middle of the US-China trade tensions. Nick Wang, Nio to Group head of finance, said that the company’s gross margins “will still be negative for the remainder of the year.”
In May, Nio entered into an agreement with a government-backed fund, made an investment of approximately $1.5 billion.
Nio also announced a $200 million private placement of convertible bonds, to be equally divided among the first investors in Tencent Holdings, and founder of the Li.
Nio, had $503.4 million in cash on its balance sheet as of 30 June.
CASH TO BURN
In order to deal with the cash to burn, Nio has been the expansion of its sales network, with a smaller showroom, called Nio Spaces non-smoking, in accordance with the Tung-June Hsieh, Nio’s chief executive officer (ceo).
“Nio Spaces, which are typically less than 200 square metres, it will allow us to quickly, cost-effectively and in a meaningful increase in the number of retail outlets in the market,” Hsieh said. “By the end of 2019, our goal is to be well-established about 200 Nio Spaces non-smoking, in more than 100 cities in China.”
Nio will also be the promotion of a more regionally-driven promotion, the use of a vehicle, a subscription program, and then press the the sale of business users and fleet managers.
After the reduction of the workforce to be around 7,800 by the end of the third quarter, from about 9,900 in October, Nio plans to further reduce the number of employees at the end of this year, through a process of restructuring and spinning off a number of business units, Hsieh said.
Nationally, sales of new energy vehicles, including EVs, were contracted for the second month in a row in August, according to the China Association of Automobile Manufacturers.
Nio led a pack of the EV start-ups, and it was one of the first internationally acknowledged. It is composed by Tencent, and investor, Hillhouse Capital Management is among its shareholders and raised a $1 billion last year in an initial public offering that valued it at about $6.4 billion.
However, bankers said that the Chinese EV makers face the increasingly difficult to finance the efforts to fight for attention in a crowded industry.
Reporting Yilei Sun, in Beijing