Chinese electric vehicle maker NIO is losing money on every car it sells and will soon need to raise more cash
China’s answer to Tesla is in the breakdown lane.
The company, New York-listed electric-vehicle maker NIOInc.,NIO -20.22%said it lost $483 million last quarter, a 25% greater loss than the previous quarter. That was partly because of a June recall of 4,803 cars—equivalent to around a quarter of those it had ever delivered—for battery problems. Even excluding recall costs, though, NIO’s gross margin was still minus 10.9%.
Further stoking investor anxiety, the company decided to cancel its earnings call scheduled for Tuesday, just hours before it was to take place. NIO’s shares fell 20% in response to the results and the cancellation. The company promptly rescheduled the call for Wednesday.
NIO’s current market value of $2.3 billion is less than the amount of money the company has ever raised. That includes a total of $3.5 billion through private fundraising and last September’s initial public offering and another $850 million in convertible bonds following its listing.
The company had around $500 million in cash on its balance sheet as of June, a big drop from the $1.1 billion it reported a quarter earlier. Chinese internet giant Tencent, which owns a 13% stake, and NIO’s own chairman and founder, William Li, pumped another $200 million into the company this month through convertible bonds. At the rate that the company is burning through cash, though, it will likely have to issue more securities soon.
It will be hard for NIO to drive out of this ditch. It loses money on every car it sells, but demand probably would evaporate if it tried to raise prices. NIO’s sport-utility vehicles fetch around $50,000 to $70,000, about half the price of a Tesla Model X in China, yet they are struggling to attract buyers.