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'China's Tesla' NIO slashes thousands of jobs as losses mount

Electric vehicle startup to raise $200m from chairman and Tencent

NIO's EP9 sports car: The Chinese company has lost nearly 80% of its market capitalization since its listing. (Photo courtesy of NIO)

NEW YORK -- Chinese electric vehicle maker NIO said it will lay off another 1,000 employees Tuesday, after reporting heavy losses, adding to growing uncertainty around the startup's future.

The New York-listed company's new round of restructuring will be conducted by the end of the third quarter. The Shanghai-based startup had already cut down from a staff of 9,100 in January to around 8,800 in August and shut down an office in Silicon Valley.

The company canceled its scheduled earnings call scheduled for Tuesday. It reported a worse-than-expected net loss of 3.29 billion yuan ($478 million) for the second quarter of 2019, an 83.1% deeper loss on the year and 25.2% deeper than in the first quarter.

NIO shares plunged over 25% Tuesday morning on the New York Stock Exchange. 

Amidst the hemorrhage, the automaker said it will raise $200 million in convertible notes from major shareholder Tencent Holdings and NIO Chairman and CEO William Li, though the amount falls short of the company's cash burn rate.

NIO's revenue shrank to 1.51 billion yuan from 1.63 billion yuan in the previous quarter, as total deliveries slipped 10% to 3,553.

"In response to the overall tempered market conditions, we are also working hard to maximize returns on our resources and have implemented comprehensive efficiency and cost-control measures across the organization," Li said in a statement.

The company recalled 4,803 of its ES8 vehicles in July. But NIO's troubles also come amid China's phaseout of subsidies that aided the electric vehicle industry's meteoric rise and sustained its growth.

Subsidies for the ES8 model were cut this year to 11,500 yuan -- about $1,600 -- from 67,500 yuan in 2018. Consumers now pay nearly $8,000 more for the vehicle than they did a year ago.

Beyond its internal challenges, NIO faces tougher competition from American electric vehicle maker Tesla, which is poised to begin production at its Shanghai Gigafactory this year to deliver locally made cars to Chinese customers.

NIO is banking on a further capital injection from state-owned Beijing E-Town Capital, as the automaker incorporated a new entity in the city's economic-technological development area. The company said it would receive up to $1.5 billion in investment from E-Town, according to a framework agreement announced in May.

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