Nio’s stock is skyrocketing, but the carmaker needs more cash fast
Nio — China’s troubled Tesla rival — gave investors a little bit of hope this week when it reported improving car sales and revenue. But the electric carmaker is still hemorrhaging money and could have problems keeping the lights on if it doesn’t find more cash.
Nio’s stock popped nearly 54% in New York on Monday to $3.72 after it reported $257 million in revenue for the third quarter, a 25% uptick from the same period a year earlier. It also said it delivered nearly 4,800 cars in the quarter, an improvement over the first and second quarters of 2019. It expects to have delivered more than 20,300 cars by the end of the year.
But the company has lost $1.2 billion so far this year, and admitted Monday that its cash problems are a huge issue. It had about $274 million cash on hand at the end of September, and said in a statement that it doesn’t have enough money to keep its operations going for the next year without external financing.
Nio has gotten some funding from investors. New CFO Feng Wei, who also goes by Steven Feng, pointed out during an earnings call Monday that Tencent loaned the company $100 million — money reflected in its most recent earnings report. Nio CEO Li Bin, also known as William Li, also loaned the company roughly $90 million out of his own pocket as part of that agreement.
Feng added that Nio has made “significant positive progress” on securing new funds. But he said those projects are still ongoing and declined to disclose any other information.
The company still needs to “take every effort” to save costs, Feng added, including securing more capital and selling more cars.
Nio has also been laying off staff. Li said the company’s headcount should drop below 7,500 by the end of the year, after starting 2019 with about 9,900 people.
The stock has been on a wild ride, too. It reached an all-time high of $10.06 in March but has plummeted more than 60% since then.
A tough market
Nio was once billed as China’s answer to Tesla. But the company is contending with a ton of pressure, including a slowing Chinese car market and tough competition.
The number of electric car makers registered in China has ballooned as the country pushes for a more aggressive adoption of new energy vehicles, such as electric cars or plug-in hybrids. But the market is now oversaturated, leading the government to dramatically cut incentives for buying those kinds of cars.
Nio, meanwhile, still has a long way to go before it makes a profit, analysts from research firm Tianrui Securities said in a note on Monday.
And its American rival Tesla is doing well. While it lost a ton of money in the first quarter, the company got a better handle on cost and rebounded. Elon Musk’s electric car maker just started delivering its first China-made Model 3s.
Tesla’s rollout of those vehicles is “adding to the misfortunes” of Nio, the Tianrui Securities analysts added.
Li, the Nio CEO, said Monday though that he thinks his company’s cars are “still very competitive.”
“We don’t actually belong to the same segment with Tesla Model 3,” he added.
