Electric carmaker Nio is lacking liquidity
The Chinese electric vehicle maker Nio raised substantial doubt in its ability to continue its business due to on-going financial difficulties that have been exacerbated by the coronavirus. The reduced EV subsidies in China also played a part.
The Tesla rival has been feeling the decrease in demand in the world’s largest electric car market and reduced government subsidies. The Covid-19 had then worsened Nio’s situation as it disrupted the production and delivery of its models.
In tough times, Nio’s reserves are not enough to back up operation for much longer. Nio said in a statement: “The Company’s cash balance is not adequate to provide the required working capital and liquidity for continuous operation in the next 12 months. The Company’s continuous operation depends on the Company’s capability to obtain sufficient external equity or debt financing.”
Such external financing could have come from Hefei’s city government. However, the agreement to raise more than 10 billion yuan and set up new manufacturing facilities isn’t final yet.
“The parties are working on the legally binding definitive documents to be signed,” Nio Founder and Chief Executive Officer William Bin Li said.
According to the annual financial report, Nio delivered 20,565 vehicles last year, after 11,348 cars in 2018. Total sales in 2019 amount to 1.124 billion dollars. However, the operating loss for the same period is $1.591Bn, according to the report. In the fourth quarter, however, in which more than 8,000 vehicles were delivered alone, the financial situation has improved, according to Nio executives.
“We are pleased with our financial performance in the fourth quarter of 2019,” said Wei Feng, NIO’s chief financial officer, before pointing to “great efforts to optimize our organizations and to improve operation efficiency, which resulted in certain one-off expenses in the fourth quarter”. Feng believes that these efforts will “significantly reduce our operating expenses and improve our cash flows in 2020 and beyond”.
However, the short-term business outlook does not precisely give rise to hope: Due to the Covid-19 outbreak, Nio expects to deliver no more than 3,400 to 3,600 electric vehicles in Q1/2020 – a decline of around 58 per cent compared to Q4 2019. Quarterly sales are expected to fall in similar measure, and Nio does not address the expected quarterly loss in the announcement.
Overall vehicle sales in China fell 18% in January while sales of new energy vehicles plunged 54.4%, preliminary data from the China Association of Automobile Manufacturers (CAAM) showed.
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