Nio Loss Narrows; EV Maker Warns of Hit From Chip Shortage

Chinese electric vehicle startup Nio Inc. reported a narrower first-quarter loss, while warning the global chip shortage will keep a lid on deliveries.

The Shanghai-based company posted a net loss of 451 million yuan ($68.8 million) in the three months ended March 31, compared with 1.69 billion yuan a year earlier, it said in a statement. It also marked an improvement on the 1.39 billion yuan net loss it posted in the last quarter of 2020. Revenue rose to 7.98 billion yuan, beating estimates of 7.16 billion yuan.

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Nio delivered 20,060 vehicles in the quarter, a 423% increase from a year earlier when China was plunged into lockdowns during the first outbreak of the coronavirus. It forecast deliveries of between 21,000 to 22,000 vehicles this quarter. Like the rest of the auto industry, Nio has been hit by the global chip shortage. The company suspended vehicle production for five days at the end of March.

“The overall demand for our products continues to be quite strong, but the supply chain is still facing significant challenges due to the semiconductor shortage,” Chief Executive Officer William Li said in the statement.

A slew of automakers, including Honda Motor Co., BMW AG and Ford Motor Co. this week flagged production cuts and lost revenue from the debilitating chip drought.

“The global chip shortage that has disrupted automakers’ operations in China since late 2020 will get worse before it gets better,” S&P Global Ratings said in a report Thursday, adding it “may slow but not derail the recovery of the Chinese auto sector.”

Nio Loss Narrows; EV Maker Warns of Hit From Chip Shortage

Nio shares dropped 1% to $38.59 in after-market trading Thursday in New York. Before the earnings release, the stock closed down 5.3% to $38.99.

Investors dumped electric-vehicle stocks after automakers across the globe warned about the severe impact from the chip shortage. Thursday’s sell-off extended Nio’s decline to 20% so far this year, after the stock surged more than 1,100% last year when Tesla Inc.’s blistering rally prompted investors to pile into the EV industry.

Tesla Rival

With its more expensive cars and clubby showrooms, Nio is seen as the closest competitor to Tesla in China. Its SUV range starts from 358,000 yuan, more expensive than Tesla’s most popular basic Model 3 sedans, which start from 249,900 yuan. Nio unveiled its first all-electric sedan, the ET7, in January, a car that will pit it more squarely against Elon Musk’s EV pioneer.

Another point of difference between Nio and Tesla is that Nio has embraced the so-called “battery-as-a-service” model, whereby consumers are able to buy the car shell while leasing the battery and upgrading it as technology changes and improves. This makes the upfront cost of buying an EV cheaper.

Still, Nio has a way to go to catch Tesla, even as the Palo Alto, California-based reels from a series of public relations missteps. In March, 34,635 China-built Teslas were registered in the country, according to data from state-backed China Automotive Information Net. That’s more than Nio expects to deliver this quarter.

Nio and fellow New York-listed EV startups Xpeng Inc. and Li Auto Inc. are leading the charge to stake a claim in China’s burgeoning EV market, which is already the world’s largest. Still, they face growing competition from established automakers like BMW and Volkswagen AG which are committing tens of billions of dollars to an electric future, domestic rivals such as Zhejiang Geely Holding Group Co., and now even tech giants including Baidu Inc. and Xiaomi Corp., who are planning to muscle in on the EV market.

To keep pace, Nio is planning a second factory in the Xinqiao Industrial Park in Hefei. “To ensure sufficient production capacity for our upcoming products, together with our partners, we have kicked off the planning and building of a new plant,” Li said.

It’s gross margin rose to 19.5% in the first quarter, from 17.2% in the fourth quarter, mostly driven by the take up of Nio Pilot -- its advanced driving assistance package -- and 100kWH battery pack.

What Bloomberg Intelligence says:

Nio’s narrower-than-expected loss versus consensus suggests a bright margin outlook for tech-focused electric-vehicle peers like Xpeng, as increasing revenue contribution from software, which has heftier margins than vehicle manufacturing, can strengthen profitability.

--Steve Man, senior industry analyst

©2021 Bloomberg L.P.

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