Nio has also put its expansion plans on hold for the time being due to tight market conditions. It has also discontinued any additional incentive programs like free battery swap for new users.
In the latest development Monday, June 12, Chinese electric car makers nio has announced a reduction in the prices of its cars by about $4,200 with immediate effect. Apart from this, the company will also end the free battery swap for new buyers.
This is quite surprising because in April 2023, Nio CEO William Lee claimed that the company would not engage in a “price war”. Rivals such as Tesla and other local Chinese electric carmakers announced price cuts earlier this year to attract more customers.
Interestingly, last Friday Nio’s CEO also announced that the company is delaying its capex plans along with some research and development projects. Lee said the delay would be a part of their efforts to resolve issues related to cash flow due to fewer car deliveries.
As of the March-end quarter, Chinese electric carmaker NIO reported cash and cash equivalents of 14.76 billion yuan ($2.07 billion). This was much lower than the figure it had predicted for the end of 2021 and 2022. In a note on Monday, June 12, analysts at China Merchants Bank International said:
“NIO’s decision to cut down on non-core projects is very slow. It also now faces a dilemma between brand positioning and profitability, as it has started cutting service benefits, which could tarnish its brand image and thus sales more severely than expected. .
As a result, analysts have cut their ratings to buy from Nio stock.
Nio failed to deliver on time
As per the latest monthly figures for the month of March 2023, the total deliveries of the Nio stood at just 6,155. This was lower than the first quarter average deliveries of just over 10,000 vehicles a month. During the fourth quarter, monthly average deliveries stood at a staggering 13,350 cars.
Interestingly, Nio remains optimistic, setting a target of at least 20,000 monthly car deliveries during the second half of the year. Nomura believes the Chinese electric carmaker will improve delivery with its new models – the ES6 SUV and the ET5 Touring sedan.
“That said, we expect NIO’s inherent upside to be curtailed by intense competition and limited market share recovery in 2023F,” the Nomura analysts wrote.
By the end of 2019, Nio’s available cash fell to less than $1 billion. However, in 2020, the company received a lifeline of around $1 billion from investors including government-backed entities, helping them to recover. Recently, the company’s CEO, Lee, said that they have enough cash to support their business operations.
Unfortunately, Nio experienced a significant decline in gross margin during the first quarter. It declined from 14.6% last year and 1.5% from 3.9% in the fourth quarter.
With strong government subsidies, the Chinese automotive market is one of the largest in the world. As a result, the electric car industry is booming and one in three cars sold is electric. analysts at Mizuho Securities said in a note on Friday Said,
“Despite short-term headwinds, we believe NIO is well positioned to launch its lowest-cost SUV ES6, a multi-year EV adoption tailwind and market leadership in premium EVs in China, the largest EV market, with many upcoming opportunities including EU/global expansion is well positioned with a ramp up, and an expanded product portfolio.
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Bhushan is passionate about Fintech and has a good grasp of understanding the financial markets. His interest in economics and finance drew his attention to the newly emerging blockchain technology and cryptocurrency markets. He is in the process of continuous learning and keeps motivating himself by sharing his acquired knowledge. In his spare time he reads thriller fiction novels and occasionally explores his culinary skills.
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