This week’s issue features our interview with Dr. Chen Yudong, president of Bosch (China) Investment Co., Ltd., and the latest updates from Chinese smart EV startup NIO.
Coincidentally, one is the biggest foreign supplier in China in terms of revenues, and the other is the country’s leading player in the smart EV startup race in terms of cumulative delivery volume. And one is a huge supplier of the other, and virtually every other Chinese smart EV startup, for that matter.
NIO’s current lead in cumulative delivery volumes, which by the end of April 2019 totaled more than 16,000 units since deliveries began 10 months ago, could be in jeopardy this year if April performance is any indication. It ranked third in deliveries in the month, behind Xpeng Motors, which only recently started deliveries, and WM Motor, which began deliveries late last year. Losses continued to mount as deliveries weakened, as reflected by its Q1 2019 financial results released on May 28. Its stock price dropped to its lowest level yet since its IPO last September, at just $3.61 on May 30, putting it at a valuation of $3.7 billion, below the recently listed Chinese coffee startup Luckin, which was valued at $4 billion as of the end of the same day.
The good news was that NIO’s second model, the ES6, rolled off production lines as planned on May 28 with deliveries set to begin later in June, and it got a huge ¥10 billion lifeline up north from Beijing’s E-Town Capital, which could see it set up another manufacturing plant away from Shanghai, where it failed to do so.
The new investment is nice, but on the flip side, it reflects the shortage of cash and dire need for capital for NIO as it continues to burn cash and faces pressure from the market, which is in a funk never before seen in the history of the Chinese auto industry.
As Dr. Chen puts it, the challenge for NIO and every other Chinese smart EV startup is not when they start deliveries, but whether they can consistently deliver meaningful amount of vehicles long into the future. That is exactly what NIO is facing at the current moment.
Besides, they need to start thinking about making money and become profitable, rather than relying on investor money and continue to burn cash. That, according to Dr. Chen, is the responsible way to grow their business, responsible for their shareholders, suppliers and partners.
But to do that, it must overcome the consistent delivery challenge in the first place. So far NIO has not proved it can do so, or at least it’s too early to conclude that it can and will, hence the reaction from the stock market. It will be interesting to see whether the ES6 can successfully drive up deliveries as it’s supposed to address a much bigger market segment than the ES6.
If not, NIO will really be in trouble.
A picture of NIO Founder, Chairman and CEO William Li taking a selfie with a bowl of beef noodle at a roadside joint for dinner the same day that he got the ¥10 billion lifeline went viral on Chinese social media. I guess it reflects the current state of mind for many industry players, both the startups and incumbents: tighten your belt and survive! Y