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NIO Loss Narrows Thanks to Popularity of New Electric SUVs

Bloomberg logoBloomberg 8/11/2020 Bloomberg News
a car parked in front of a window: A NIO Inc. ES8 electric sport utility vehicle (SUV) stands on display at the automaker's showroom in Beijing, China. © Bloomberg A NIO Inc. ES8 electric sport utility vehicle (SUV) stands on display at the automaker's showroom in Beijing, China.

(Bloomberg) -- NIO Inc.’s loss narrowed for a fourth consecutive quarter, as rising demand for electric SUVs helps the Chinese carmaker revive its fortunes.

The second-quarter net loss shrank to 1.2 billion yuan ($173 million) from 3.3 billion yuan a year earlier, NIO said Tuesday in a statement. The company predicted third-quarter revenue exceeding analysts’ estimates as deliveries rise.

The sleek ES8 and ES6 SUVs are attracting buyers as the coronavirus pandemic eases in China, helping NIO’s stock price to more than triple this year. As the country’s electric-vehicle makers battle for survival, NIO is getting closer to securing a position as a longer-term challenger to Tesla Inc. in the world’s largest EV market.

The company’s stock rose as much as 8.7% to $15.45 in New York before falling 4.3% to $13.60 at 10:46 a.m.

Chinese Electric Cars Use Aggressive Pricing to Undercut Tesla

A cash injection from a regional government and a fresh credit facility from local banks helped NIO clear near-term funding hurdles this year. After losses accumulated, the company had said late last year it didn’t have enough money to continue operating for another 12 months unless it raised more funds.

NIO, which had an initial public offering in New York in 2018, also slashed jobs and scaled back marketing expenses to stem losses. Gross margin, or revenue minus production costs, was positive for the first time in the second quarter at 8.4%.

“We expect both vehicle margin and gross margin to exceed 10% in the second half of the year,” Chief Executive Officer William Li said on an analyst call.

NIO has delivered 17,702 vehicles so far in 2020, more than doubling from a year ago even as China’s EV market sputtered. Analysts at Morgan Stanley this month raised their 2022 volume forecast for NIO by 20% to 125,000 vehicles, saying the company is now “motoring beyond startup mode.”

Yet NIO lags far behind Tesla, whose registrations in China topped 50,000 in the first half. The U.S. giant is also preparing to start producing the Model Y crossover at its Shanghai plant, making competition more intense.

NIO plans to begin delivering its EC6, a compact SUV coupe and direct competitor to the Model Y, in late September, and its next offering will be a sedan.

More Rivals

More rivals are seeking additional funds as China’s EV market recovers. Li Auto Inc. raised $1.1 billion in late July, followed by Xpeng Motors filing for an IPO this month. WM Motor Technology Co. is weighing an initial stock sale in Shanghai as soon as this year, people familiar with the matter said, and Hozon New Energy Automobile Co. is targeting a listing in the same city possibly next year.

In the analyst call, Li said NIO plans to set up a battery asset-management company as soon as August that will allow customers to buy vehicles separately from the battery, which they will lease from the company. The battery is the most expensive component, so this would lower the purchase price. NIO will have partners in the venture and won’t be the main stakeholder, so it “will not affect much of our balance sheet,” Li said.

NIO has 100,000 NEV, or new energy vehicle, credits from last year, which could generate 120 million yuan in revenue based on the current market price. The company is talking to other carmakers and plans to sell some of the credits in the third and fourth quarters, counting them as part of gross margin.

This year, NIO may generate 200,000 credits and plans to sell them in 2021, when it expects the price of credits will rise.

(Adds stock price in fourth paragraph and comments from CEO)

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©2020 Bloomberg L.P.


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