Shares of Chinese electric-vehicle makers and suppliers fell after a worse-than-expected quarterly loss for NIO Inc., the country’s answer to Tesla Inc., exacerbated concerns that a bubble in the world’s largest EV market may be bursting.
BAIC Motor Corp., which Bloomberg NEF says brought in more than $4 billion in EV revenue last year, saw its stock price drop 1% in Hong Kong, while BYD Co. closed down 4.1%, its biggest loss in over a month. Wuxi Lead Intelligent Equipment Co. retreated 4.5% in Shenzhen.
NIO’s U.S.-listed stock fell as much as 6.9% to $2.02 on Wednesday. The shares have plummeted more than 30% this week as the automaker plagued by cost overruns, vehicle recalls and a pullback in state subsidies for electric-car purchases posted a worse-than-expected loss.
The Chinese electric-vehicle maker has failed to assuage fears that it’s running short on cash. The company is aggressively expanding its sales efforts and taking comprehensive measures to reduce costs, Chief Executive William Li said on an earnings call.
“If a company’s liquidity is measured in weeks, it is definitely very dangerous," Robin Zhu, an analyst at Sanford C. Bernstein, said by phone. NIO may need to seek government support, which will be difficult to get, he said.
The company is backed by Chinese technology giant Tencent Holdings Ltd. NIO plans to slash its workforce to 7,800 by the end of this month, from more than 9,900 at the start of the year. It’s also raising $200 million from Li and a Tencent affiliate and planning to spin off some non-core businesses by the end of the year.
“People are wondering whether the company can continue to survive," said Jason Chen, an analyst from Blue Lotus Capital Advisors.
More broadly, the automaker’s struggles lend credence to mounting concerns that China’s state-sponsored support of the industry inflated a bubble that’s poised to pop. The nation’s sales of EVs and “new-energy" vehicles fell for a second straight month in August as the government scaled back subsidies. China accounts for half of the world’s EV sales.
“The latest industry sales and pricing data have not shown improvement, prompting us to fear the anticipated recovery in industry demand in September and 4Q may prove more modest than expected," JPMorgan analysts Ryan Brinkman and Rebecca Wen wrote in a note, in which they also withdrew their price target on NIO.
The Chinese government started pushing development of electric cars to help eliminate air pollution, reduce oil imports and develop high-technology manufacturing. By 2025, China’s leaders want annual sales of new-energy vehicles — including pure-battery electrics, plug-in hybrids and fuel-cell cars — to reach 7 million units. That’s the equivalent of about 20% of China’s total auto market. LA Times/Bloomberg