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Electric cars in China

China's Nio shrugs off Tesla price cuts with narrowed loss

Chairman rules out new fundraising as company plans launch of two sedans

Until now, Nio's EV lineup has been dominated by SUV models like the ES6, which was shown at the Auto China show in Beijing in September.   © Reuters

HONG KONG -- Rising electric vehicle maker Nio is planning a pair of new vehicle models that will intensify its faceoff with Tesla in China's fast-growing market.

Nio, whose stock price has soared more than 1,000% in the past six months, reported a narrowed quarterly loss, saying it had fended off multiple rounds of price cuts by its U.S. rival, led by Elon Musk.

William Li, Nio's chairman, said the company was bringing out two sedans, filling out a lineup that now includes only sport utility vehicles. That will put Nio into direct competition with Tesla's Model 3, China's bestselling EV model so far this year.

Domestic brands including Nio, Xpeng Motors and Li Auto are facing challenges from the U.S. carmaker, which has lowered prices for its vehicles several times in China since last year.

"Tesla's first price cut affected our sales for about a week, but afterward, our sales rebounded back quickly," Nio's Li said.

He added that Nio had seen little impact from Tesla's subsequent price cuts. "In fact, we achieved record sales in October," despite the fact that Tesla lowered prices by another 10% the same month, he added.

During the July-to-September quarter, Nio's sales jumped 146.1% to 4.3 billion yuan ($628.4 million), up 22.4% from the previous quarter. The company also managed to narrow its loss to 1.05 billion yuan from 1.18 billion yuan the preceding quarter and 2.5 billion yuan a year before.

Li said Nio had achieved positive cash flow from operating activities for two consecutive quarters and he expected the full-year figure to be positive as well.

Nio has been a stock-market darling since June, pulled along by Tesla's strong run and its own improved sales and delivery figures. Its share price has risen more than tenfold, making it China's second-most valuable car company just behind Warren Buffett-backed EV maker BYD, as well as pushing its market capitalization past that of General Motors.

Nio's heavy investment in new models has already led it to sell a 24.1% stake to the government of the central Chinese city of Hefei to raise 7 billion yuan in cash. The deal came after the carmaker had said in March that it might not have enough capital to survive another 12 months, though it had raised over $1 billion in its high-profile U.S. IPO in late 2018.

Li said Nio had no plans to raise further funds in the short term.

The company gave aggressive sales guidance for the current quarter, saying it expects to deliver 16,500 to 17,000 vehicles compared with 12,206 last quarter. It expects revenue of between 6.26 billion yuan and 6.44 billion yuan for October-December period.

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