A young electric car company in China, NIO, appears to be days to weeks from bankruptcy.
Analysts at Sanford C. Bernstein led by Robin Zhu cut their price target for NIO to just $0.90. In a note, Zhu and his team said that even with a recent $200 million raise, the company may have only weeks of cash remaining.
China has been rolling back subsidies provided for new energy vehicles and plans to phase out subsidies after 2020.
NIO sold 3,140 ES8 cars in the quarter, down from 3,989 cars in the first quarter. ES8 is a pure-electric, seven-seat sport-utility vehicle, which is seen as a rival to Tesla’s Model X. They sold 413 cars of the cheaper ES6 model.
NIO also tried to create luxury social clubs and luxury non-car product lines as part of their offering.
The stock is down to about $1.22 a share.
SOURCES – NIO, Motley Fool
Written By Brian Wang, Nextbigfuture.com
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.
A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts. He is open to public speaking and advising engagements.
TMT
(Too Many TLAs)
((Three Letter Acronyms))
Are you in China? That is what I am talking about. The Chinese car bonanza has petered out. If you have your drivers and 5 very nice wheels in China then all I can say is gongxi.
Else, I am kinda like you, a gearhead too. I love my old V8s (no, no matching no. show cars, just a lot of hp and leaky gaskets) and other wheels, including a Tesla. But I also like to take to the skies. When you replace your topolino why not consider a Hyundai Kona and save some money?
Can’t look at it that way. The Chinese who can afford a car have one, by and large. It is a not a car/capita number. It’s affordability and congestion/space. Chinese car sales are down 25% from peak (though NEV sales are up). Even if you wanted one, the volume is regulated via the plate quotas. A plate in Shanghai costs about $12k, or about the same as the average annual urban salary. And if you already have a car then you gotta figure out what to do with it.
China is far from saturated with 179 cars per 1,000 people. The US has 811 per 1,000 people. The most is San Marino at 1,263 per 1,000 people.
True saturation is probably around 3,000 per 1,000 people.
And there are other countries with large populations and not many cars. India is way below China with just 22 per 1,000 people and 1.37 billion people. Indonesia has 87 per 1,000 and a population of 270 million. Pakistan 42 per 1,000 and 216 million. Nigeria 64 per 1,000 and 201 million. Bangladesh has just 4 cars per 1,000 people and 163 million people.
The median country is at 146 per 1,000. So the World is far from saturated. Even if your idea of saturated is 3 per family, 1 per retired couple, and 1 per young person (18-22)…136 per 1,000 is not remotely close to that.
How many cars do you own? Boy did you pick the wrong person to ask that question to, considering I just had an argument with the (in)significant other after being asked the same very question. I only have three daily drivers, and they’re insured as such. Then I have my addiction. I’ve got five other vehicles, mostly vintage Italian sports cars, on a classic car insurance policy. Yep, you directed that question to a hard core car collector. Ha! When the day comes, I’ll go looking for a used model 3 to replace my Fiat 500e, which is really a Gen One design EV. I’m now ready to use an electric car for more than just commuting.
uh, NEV = New Energy Vehicle. It’s a China thing.
And this is why no internet companies ever went broke in the period 1995-2010?
That’s not how business works.
This company wasn’t making NEVs (neighbourhood electric vehicles a.k.a golf carts). These were full sized, full range EVs.
I wouldn’t look at it that way. The Chinese car companies, for the most part, are built extremely efficiently, about 8 hrs/car versus best in class 10-12 elsewhere. Common platforms shared by many companies who then add some design and body work.
The inefficiency is selling them. Even with this very high efficiency (notice I didn’t say effectiveness – the quality) the cost is higher than the price that customers are able to afford. Don’t forget, Chinese generally pay for their vehicle in cash. They haven’t – yet – discovered the Western idea to buy stuff they can’t afford – on credit. Not only cultural reasons, but there is no financial credit infrastructure in place (e.g., credit scores, finding investors to off load the risk etc).
Not taking a dig at Tesla here, but how many cars can you own? The market is saturated. There simply aren’t enough new plates being issued, and hardly anyone has space for more than one car. Doesn’t matter if people clamor for a 200k car, they won’t be able to get a plate or a place to park it.
The entire Chinese NEV “business” (in quotes because it isn’t really a business) is in free fall. This summer, the government subsidies dropped by 80% and for 2020 they go to zero. For your average urban Chinese, this is material and makes a HUGE difference in whether or not you will buy a NEV. Government had to do this because the subsidies were becoming material, so they decided to throw the industry under the bus, as it were.
What really stings the government is that many of these car companies took government money to build up their business and then the founders went IPO in New York and transferred their holdings into USD…
The other reason the government is putting the brakes on the industry is that there are already enough cars in China. The urbanites (only people who can afford cars) have already bought cars and the fleet is still way to young for a replacement industry. And no one has 2 cars and lives in a leafy suburb with a 2 car garage, dog and backyard swing set and soccer practices to go to.
The last reason for the NEV implosion is that the electrical grid is nowhere near built out to make the business work. But all this still hasn’t stopped the Government. Car companies are forced to churn out EVs (about 4% of output) even if no one buys them. Might sound totally dumb, but CCP rather have millions of unsold cars lying around than millions of laid off and pissed off employees.
I think you have better odds at roulette in Vegas. All boils down to whether CCP wants to give William Li, the founder, some money. I says no f**k**g way. Why? Chinese IPOs in the US is really just a money laundering operation. And Nio is part of the scheme. The Chinese company raises money from inside and outside. Outside investors don’t actually own anything, only a promise to get a dividend, eventually. You can have an equity JV in China for a company, but gives you no say or ownership in the holding company, only in that specific SPV. It is meant to keep foreign money in but with zero influence.
Anyhow, Chinese company decides to list in the US – mainly because the US/foreign equity investor wants his money (what will he do with yuans in China??). Also, because the FOUNDER wants to convert his yuan shares into USD. So you get an IPO, shares are sold to gullible foreign investors (not in the actual company, Chinese ADRs have no ownership in the underlying), and the foreign VCs and Chinese founders get greenbacks.
The CCP frowns upon billionaires who park their money outside. The founders, should, as good patriotic citizens, repatriate this. They don’t, and then get into trouble. Li isn’t a model citizen and I suppose has a deteriorating social score. If I could, I would be shorting every single Chinese ADR out there.
Their love for Louis Vuitton stuff has made Arnault a very rich man.
Just like the Obama subsidized solar companies that all went bankrupt. Communists are hesitant to let markets decide.
With the slowing in the economy Elon may have chosen the wrong time to start a very expensive megafactory. Things are not getting better soon.
How could an electric car company possibly fail? I mean this is the savior of our future and present, just ask Greta Musk.
Nevermind. The ES6 is over $50K USD just for the Standard version (and that’s with an inflated dollar and deflated yuan). Who wouldn’t wait for a Tesla at prices like that? It’s no wonder they’re going bankrupt.
Not a bad looking car. I wouldn’t mind driving one… depending on the price, specs and reliability.
And like many subsidized companies they spend money inefficiently and go under.
Not good. The more competition the better for consumers
I’m tempted to put 1000 dollars in their stock in case they get a life line…
Yes, just like US subsiding its own companies 🙂
Subsidies or not, this was destined to happen. There are too many EV companies in China right now. A shake-out was inevitable, especially of the newer and smaller ones. They’re not the first to go, and won’t be the last. Furthermore, the news that Tesla would be producing cars for local consumption has no doubt placed a hold on Chinese consumers purchasing an EV. They’ll happily wait for a proven design and ‘the real thing’. Besides, Teslas are viewed as status symbols, something up and coming rich Chinese like to be seen in.
Sad. Glossy, good looking. Can’t make it without subsidies. Kind of a narrative-of-the-times in its own right, isn’t it? About Trump’s complaints and tariffs and so on.
Just saying,
GoatGuy ✓