Nio cuts prices for its cars — and delays business expansion plans

BEIJING — Chinese electrical automotive model Nio stated Monday it’s slicing prices for its cars by the equal of $4,200 efficient instantly, and ending free battery swaps for new patrons.

The transfer is opposite to CEO William Li’s declare in April that Nio would not join a “price war.” Tesla and different electrical automotive corporations in China had reduce prices earlier this yr in a bid to draw patrons.

The worth cuts additionally comply with Li’s feedback Friday that the corporate was delaying its capital expenditure and some analysis and improvement tasks, based on a FactSet transcript of Nio’s first-quarter earnings name.

Li stated the delay is a part of an effort to deal with the influence on money circulation from fewer automotive deliveries.

The firm reported money and money equivalents of 14.76 billion yuan ($2.07 billion) as of March, beneath what it disclosed for the tip of 2021 and 2022.

Nio’s choice to “reduce non-core tasks is simply too gradual,” analysts at China Merchants Bank International stated in a observe Monday.

“It now additionally faces a dilemma between model positioning and profitability, because it has began to chop service advantages, which might dent its model picture and thus gross sales extra severely than anticipated.”

The analysts reduce their score on Nio shares to carry, from purchase.

Nio on Monday additionally introduced it might no longer offer battery swap services for free to new patrons.

The newest month-to-month figures present Nio’s deliveries fell to 6,155 cars in May, down from the first-quarter common of simply over 10,000 autos a month. The month-to-month common within the fourth quarter was about 13,350 cars.

Looking forward, Nio stated that it aimed to ship at the very least 20,000 cars a month within the second half of the yr.

Nomura analysts stated they anticipated the automotive firm can enhance its deliveries with new fashions, just like the ES6 SUV and ET5 touring sedan.

“That stated, we count on NIO’s implied upside to be capped by intensified competitors and restricted market share enchancment in 2023F,” the analysts stated in a report.

Nomura stated it was assuming protection of Nio with a impartial score. Previously, the corporate had rated Nio at purchase.

Nio’s money and money equivalents fell beneath $1 billion on the finish of 2019. But the corporate made a comeback in 2020 with a lifeline of about $1 billion from investors, including state-backed entities.

Li stated over the weekend the corporate had sufficient money to assist its business.

However, the corporate reported a pointy drop in gross margin to 1.5% within the first quarter, down from 14.6% a yr in the past and 3.9% within the fourth quarter.

The Chinese auto market is the most important on the planet. Thanks to authorities subsidies and license plate restrictions, the native electrical automotive trade has grown and penetration of latest vitality autos has reached about one-third of latest passenger cars bought. The class contains hybrid-powered cars.

Earlier this month, China’s high government physique, the State Council, stated the nation would lengthen buy incentives for new vitality autos as a technique to enhance consumption, based on state media. It didn’t present particulars.

“Despite short-term headwinds, we consider NIO stays well-positioned with a number of upcoming ramps together with its lowest value SUV ES6, a multi-year EV adoption tailwind and market management in premium EVs in China, the most important EV market, EU/Global expansion, and an increasing product portfolio,” analysts at Mizuho Securities stated in a observe Friday.

Mizuho maintained its purchase score on Nio, however lowered its worth goal from $25 to $20 a share.

Nio shares are down by about 20% for the yr to date at $7.73 a share.