The company that has been hailed as the "Tesla of China" has announced that it hasn't been doing as well as expected. Shanghai-based Nio announced to investors that its sales for the past year have been very sluggish, which also led to it canceling its plans to build a new factory in China. Immediately following the earnings report, stock prices for the company fell by more than 18 percent.
Nio initially went public with its IPO back in September. Stock prices jumped to more than 50 percent not long after it went public as investors were feeling confident about the company's prospects given their stylish new fully electric products.
Investors had also hoped that Nio would perform well on its home turf, given the massive demand for electric vehicles and SUVs in China. The company also had strong interest from Chinese consumers, particularly for its full electric mid-sized SUV, the Nio ES6.
During the company's recent earnings call, Nio revealed that sales of its flagship electric SUV only reached 1,600 units in its first two months of 2019. This was preceded by a massive loss of US$510 million in the last quarter of 2018. Compared to its sales in the previous months, Nio described the sales figure as a "greater than anticipated" sales slowdown.
The company's chief financial officer, Louis Hsieh, explained that there were several factors that may have contributed to the sluggish sales of their electric SUV.
According to Hsieh, the drop in sales can partly be blamed on the government's lack of action towards electric vehicle subsidies. The country itself and its economic slowdown may have also played a factor, Hsieh explained. Furthermore, the CFO also blamed the hectic Lunar New Year holidays last month, which had cut into its sales.
Some market analysts have rejected the company's claims, explaining that the overall electric vehicle market in China has actually grown this year. According to the research film Marklines, sales for electric vehicles in 2018 actually jumped by more than 30 percent. The story is expected to be no different for 2019, where growth could be as much as the year before or even more. A report from Sino Auto Insights has revealed that the company's low sales figures can only be attributed to the fact that there just may be no interest in the company's products. The problem could also include the company's pricing.
Nio currently pays another Chinese manufacturer, JAC Motors, to build its vehicles. The company initially had plans to open its own factory in the country. However, due to its sluggish sales, the company has decided to scrap that idea.
