Cash-strapped Chinese Tesla challenger NIO raises doubts about survival amid Covid-19 outbreak

The electric vehicle maker’s net loss widened to US$411.5 million in the last three months of 2019, a 13.6 per cent increase quarter-on-quarter

There is substantial doubt about the company’s ability to continue as a going concern, it says

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NIO ES8 electric SUVs are seen displayed at the second media day for the Shanghai auto show in Shanghai, China April 17, 2019. Photo: Reuters

Published: 5:00pm, 19 Mar 2020Updated: 10:54pm, 19 Mar 2020

Cash-strapped Chinese electric vehicle maker NIO said it had substantial doubt about its ability to remain operational in the next 12 months while awaiting new funding to shake off difficulties heightened by the novel coronavirus pandemic.

“Based on the management’s assessment, as a result of the relevant conditions and events including continuous losses, net cash outflows, negative working capital, negative equity and uncertainties on consummation of the financing projects, there is substantial doubt about the Company’s ability to continue as a going concern,” the company said in a news release.

The company’s disclosure on Wednesday, along with the release of its fourth-quarter financial results which showed that its net loss widened 13.6 per cent quarter-on-quarter to 2.86 billion yuan (US$411.5 million) in the last three months of 2019, sent its shares plunging over 16 per cent as of the Wednesday close.

The carmaker, hailed as one of China’s main Tesla challengers, has been fighting an uphill battle with dwindling demand due to the economic slowdown, the prolonged trade war with the US and the Chinese government’s decision in March last year to reduce subsidies for electric vehicles sold in China.

NIO, backed by Tencent Holdings among other investors, has already cut thousands of jobs and shelved plans to construct its own car plant in Shanghai last year as it battles with mounting losses.

“Since NIO rolled out deliveries two years ago, it has sold a little over 30,000 of its two models, a reasonable step but still far from the sales level required for a carmaker to achieve economies of scale,” David Zhang, an independent automotive industry consultant, said, adding that the company had to rely on cash burning as a result.

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