Chinese EV startup NIO revealed it will trim staff positions by 10% this month to improve profitability. NIO’s CEO, William Li, announced the news in an internal memo Friday, citing “fierce competition” in the EV market.
According to the memo, reviewed by Bloomberg, NIO will trim its staff by 10% in November. Li said “duplicate” and other “inefficient” roles will be cut.
In addition, any projects that aren’t expected to generate earnings within the next three years will be put off or cut altogether.
The news comes as the EV price war in China intensifies. Market leaders in China, including BYD and Tesla, have slashed prices all year, pressuring others to do the same.
NIO cut prices by $4,200 (30,000 yuan) in June to keep pace in the world’s largest EV market.
The move came after NIO faced falling vehicle deliveries, margins, and profits as losses swelled in the second quarter. NIO’s losses widened to $835 million in Q2, up 119% compared to last year. Gross margins also fell to 1% compared to 13% in 2022.
NIO continues rolling out new products (like a smartphone) while expanding into new markets, which is driving up costs. With the launch of the new ES6 and EC6 this year, all NIO models have now transitioned to its next-gen 2.0 platform.
NIO to trim staff amid intensifying EV competition
“This is a tough but necessary decision against fierce competition,” Li explained in the memo Friday. He said, “Our journey is a marathon on a muddy track.”
Li apologized to the staff affected, saying to “qualify for the next round of competition,” the company needs to become more efficient.
NIO has delivered 126,067 vehicles YTD (+36% YOY), accounting for roughly 2.1% of China’s new energy vehicle market (including hybrids).
Meanwhile, BYD sold over 165,000 EVs this past month alone. The market leader posted record profits of $1.42 billion in the third quarter despite the ongoing price war in China.
After announcing a $1 billion convertible debt offering in September, NIO said it would use the funds to “further strengthen its balance sheet as well as for general purposes.” At the end of June, NIO had around $1.9 billion in cash and equivalents.
NIO stock has been stuck in a downtrend since peaking in January 2021. NIO shares are up 5% following the news Friday but are still down 20% over the past 12 months.
The pressure in the world’s largest EV market is building as market leaders BYD and Tesla squeeze rivals out of the segment.
China has already claimed several victims as lower-priced EVs make it tough for other automakers to keep pace. BYD started as a battery company, giving it a significant advantage as it expands the brand globally.
Smaller automakers, including NIO, are adapting to the changing market conditions. The next few months will be critical as EV makers look to establish their place in the market.
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