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Nio co-founder William Lee poses inside the Nio EC7 at Auto Shanghai on April 19, 2023.
Hector Ritmal | Afp | Getty Images
Beijing – Chinese electric car brand New On Monday, it said it would lower the prices of its cars by the equivalent of $4,200 effective immediately, and end free battery swaps for new buyers.
The move contradicts CEO William Lee’s claim in April that Nio will not join a “price war.” Tesla Other electric car companies in China cut prices earlier this year in a bid to entice buyers.
The price cuts also follow Lee’s remarks on Friday that the company was delaying its capital expenditures and certain research and development projects, according to a FactSet transcript of Nio’s first-quarter earnings call.
Lee said the delay is part of an effort to address the impact on cash flow from fewer car deliveries.
The company reported cash and cash equivalents of 14.76 billion yuan ($2.07 billion) as of March, less than it disclosed at the end of 2021 and 2022.
China Merchants International Bank (CMI) analysts said in a note Monday that Niu’s decision to “cut off non-core projects is too slow.”
“It also now faces a dilemma between brand positioning and profitability, as it has begun to cut service benefits, which could dampen its brand image and thus sales more sharply than expected.”
Analysts downgraded Nio stock to hold, from buy.
Nio also announced on Monday that it will No longer offer free battery replacement services for new buyers.
Birth drop
The latest monthly figures show that Nio shipments fell to 6,155 vehicles in May, down from the first-quarter average of just over 10,000 vehicles per month. The monthly average in the fourth quarter was about 13,350 vehicles.
Looking ahead, Nio said it aims to deliver at least 20,000 vehicles per month in the second half of the year.
Nomura analysts said they expect the automaker to be able to improve deliveries with new models, such as the ES6 SUV and ET5 sedan.
“However, we expect the implied upside of NIO to be limited by intense competition and limited improvement in market share in 2023F,” the analysts said in a report.
Nomura said it assumes coverage of Nio with a neutral rating. Previously, the company evaluated Nio upon purchase.
Nio’s cash and equivalents fell below $1 billion at the end of 2019. But the company returned in 2020 with a lifeline of about $1 billion from investors, including state-backed entities.
He told me over the weekend that the company had enough cash to support its business.
However, the company posted a sharp drop in gross profit margin to 1.5% in the first quarter, down from 14.6% a year ago and 3.9% in the fourth quarter.
The Chinese auto market is the largest in the world. Thanks to government subsidies and license plate restrictions, the domestic electric vehicle industry has grown and NEV penetration has reached about a third of new passenger cars sold. The category includes hybrid powered vehicles.
Earlier this month, China’s top executive body, the State Council, said the country would offer purchase incentives for new energy vehicles as a way to boost consumption, according to state media. He did not elaborate.
“Despite the short-term headwinds, we believe NIO remains well-positioned with several upcoming ramps including the lowest-cost ES6 SUV, multi-year EV-based tailwinds and market leadership in premium electric vehicles in China.” , the largest market for electric vehicles, and EU/Global expansion The product portfolio is expanding, analysts at Mizuho Securities said in a note on Friday.
Mizuho maintained its Buy rating on Nio, but lowered its price target from $25 to $20 per share.
Shares of Nio are down about 20% for the year so far at $7.73 a share.
Nio vs Tesla share performance
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