After US$5 billion in losses, China’s Tesla challenger Nio fights to survive

Shanghai-based Nio is poised to report on Tuesday that it lost around US$4 million a day during the second quarter

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A Nio car showroom is open at the Futian district in Shenzhen. Photo: Roy Issa

Published: 4:41pm, 23 Sep 2019Updated: 4:41pm, 23 Sep 2019

It took Tesla about 15 years to rack up US$5 billion in losses. Nio, the company known as China’s Tesla, did it in four.

The bleeding continues. Shanghai-based Nio is poised to report on Tuesday that it lost another 2.6 billion yuan (US$369 million) – around US$4 million a day – during the second quarter, according to the average of two analyst estimates. That would bring accumulated losses at the company, which is backed by internet giant Tencent Holdings, to about US$5.7 billion since William Li Bin founded the carmaker in 2014.

Cost overruns, weak sales, and major recalls have led Nio to plunge 74 per cent since its market value hit a record US$11.9 billion about a year ago. More broadly, the company’s reversal of fortune illustrates why concerns are mounting that China created an electric-vehicle (EV) bubble that may be about to burst.

“This year and the next, there’s going to be a lot of card-shuffling for these EV start-ups,” said Siyi Mi, an analyst at BloombergNEF. “Before, venture capital chased after them, but it’s not the case any more.”

Total EV sales in China, where half of the world’s electric cars are sold, fell for the first time in July after the government scaled back subsidies. Deliveries dropped again in August, raising doubts that one of the final pillars of strength in China’s broader car market, which has fallen 14 out of the past 15 months, is wavering.

China has gradually scaled back subsidies for new-energy vehicles – all-electric, fuel-celled cars and plug-in hybrids – since 2017 to help the industry stand on its own two feet and avoid a bubble. That has undermined growth, prompting the likes of top Chinese electric carmaker BYD Co to warn recently that earnings will wane.