Electric vehicle manufacturer Nio has reported a 50% sequential drop in quarterly revenue as its deliveries during the first three months of 2019 fell sharply.
Revenues reached RMB 1.6 billion (around $231 million) in the first quarter, down from RMB 3.4 billion at the end of last year. Deliveries of the company’s flagship ES8 SUV dropped by half to around 4,000 vehicles compared with the fourth quarter of 2018.
Meanwhile, Nio’s net loss narrowed by 25%, falling from RMB 3.5 billion to RMB 2.6 billion. Still, the company expects second-quarter revenue to decrease by as much as 30% compared the first three months of the year.
Nio also announced that it had formed a joint venture with state-owned investment firm Beijing E-Town International Investment and Development Co., which will invest up to RMB 10 billion in the new entity. E-Town is also expected to help Nio find partners to build a manufacturing plant for its next-generation vehicles. The company’s stock was up 5% in pre-market trading on Tuesday.
Nio has faced challenges from decreasing government subsidies, a macroeconomic slowdown, and the US-China trade war, Nio CFO Louis Hsieh said in an earnings call on Tuesday. Other factors include a seasonal slowdown around Chinese New Year, increased competition, and accelerated deliveries last year, the company said.
Despite beginning deliveries of its second production vehicle, the ES6, in June, Nio anticipates that it will sell just 3,200 vehicles in the second quarter.
“We expect an even more challenging sales environment and anticipate overall sequential demand and deliveries to decrease, as competition continues to accelerate and the general automobile market in China remains muted,” Hsieh said in a statement.
Nio announced earlier this year that it had abandoned plans to build a production plant in Shanghai’s Jiading District, opting instead for a “joint manufacturing” partnership with state-owned automaker JAC. The company has extended its cooperation with JAC to produce the ES6.
Apart from stalling deliveries, the company has faced several class action lawsuits, as shareholders claim the company misled them prior to going public on the New York Stock Exchange in September last year. Investors said that Nio had not disclosed the company would ditch its plans to build a factory and that it had overstated the number of vehicles the company would sell.
Nio is required to pay JAC for every vehicle produced, as well as any losses JAC incurs as a result of building Nio’s vehicles. As of the end of June last year, Nio had paid JAC RMB 65 million (around $10 million) for losses during the second quarter of 2018, according to the company’s IPO filing. The company made losses of $1.4 billion in 2018, despite revenues of $720 million.