Nio co-founder William Li poses inside the Nio EC7 at the Shanghai Auto Show on April 19, 2023.
Hector Retamal | AFP | Getty’s paintings
BEIJING – Chinese electric automotive brand wow said on Monday it was cutting the price of its cars by the equivalent of $4,200 effective immediately and ending free battery replacements for brand new buyers.
The move contradicts CEO William Li’s claim in April that Nio won’t join a “price competition.” Tesla and other electric automotive corporations in China lowered prices earlier this 12 months in an effort to draw buyers.
The worth cuts also follow Li’s comments on Friday that the company is delaying capital spending and some R&D projects, in accordance with a fact sheet transcript from Nio’s first-quarter earnings call.
Li said the delay is part of an effort to handle the money flow impact of fewer automotive deliveries.
The corporate reported money and money equivalents of 14.76 billion yuan ($2.07 billion) in March, below what it disclosed at the end of 2021 and 2022.
Nio’s decision to “in the reduction of on non-core projects is too slow,” analysts at China Merchants Bank International said in a Monday note.
“Now it also faces a dilemma between brand positioning and profitability, because it has began to scale back the advantages of services, which may worsen the brand image and due to this fact sales greater than expected.”
Analysts downgraded Nio to carry from buy.
Nio on Monday also announced it might achieve this now not offers free battery alternative services to recent buyers.
Falling deliveries
The newest monthly figures show Nio deliveries fell to six,155 cars in May, down from the first-quarter average of just over 10,000 vehicles a month. The monthly average in the fourth quarter was roughly 13,350 cars.
Looking ahead, Nio said it goals to deliver a minimum of 20,000 cars a month in the second half of the 12 months.
Nomura analysts said they expect the automotive company to enhance its deliveries with recent models equivalent to the ES6 SUV and the ET5 touring sedan.
“That being said, we expect NIO’s alleged growth to be limited by heightened competition and limited market share improvement in 2023F,” the analysts said in the report.
Nomura said he assumed Nio’s coverage with a neutral rating. Previously, the company rated Nio as a buy.
Nio’s money and money equivalents fell below $1 billion at the end of 2019. But the company bounced back in 2020 with a bailout of around $1 billion from investors, including state-backed entities.
Li said over the weekend that the company has enough money to support its operations.
Nonetheless, the company saw its gross margin fall sharply to 1.5% in the first quarter, down from 14.6% a 12 months ago and 3.9% in the fourth quarter.
The Chinese automotive market is the largest in the world. Because of government subsidies and license plate restrictions, the local electric automotive industry has grown, with penetration of recent energy-powered vehicles reaching a few third of recent passenger automotive sales. The category includes hybrid cars.
Earlier this month, China’s top executive body, the State Council, said the country would expand incentives to purchase recent energy vehicles as a solution to boost consumption, in accordance with state media. He didn’t provide details.
“Despite short-term adversity, we consider NIO stays well positioned with many ramps to return, including the least expensive ES6 SUV, multi-year EV adoption and leadership in premium EV market in China, largest EV market, EU/EU expansion world. and an expanding product portfolio,” analysts at Mizuho Securities wrote in a Friday note.
Mizuho maintained a buy rating on Nio but lowered its price goal from $25 to $20 per share.
Nio shares fell about 20% year-on-year to $7.73 a share.
Nio vs Tesla share performance