Electric vehicle maker Nio on Monday posted an 11.5% drop year on year in January sales, outstripping peers during a historically low season for the Chinese auto market.
Why it matters: The likely significant impact of the coronavirus outbreak is beginning to show. In January delivery results, Nio warned of an expected drop in production and deliveries in February after two months of growing sales.
- Nio did not give a specific figure for February, but is currently monitoring the situation alongside efforts to battle the outbreak with the government and industry.
- Swiss investment bank UBS expects a hard hit to China auto sales with a year-on-year decline of more than half in February, China auto analyst Paul Gong said at a media briefing on Monday.
Details: Nio delivered 1,598 electric vehicles (EVs) in January, including 1,493 units of its five-seater sport utility vehicle, the ES6. It only handed over 105 units of its premium ES8 SUV, the lowest on record for the past year and a half.
- The decrease was primarily due to the reduced business days in the month, the company said in the announcement, a result of the Spring Festival holidays, a historically low season for auto sales in the country.
- The company also blamed the extended holiday period, which was initially set to end on Jan. 30, for its sales results. Nio founder and CEO William Li said it partially resumed operations by offering services and engaging with customers online during the holiday.
- Nio share prices rose by a modest 1.6% to $3.87 on Monday after the results were released.
- It also comes as the company closed a $200 million funding round using convertible bonds with major investor Tencent, which it revealed in September. The first tranches of the bonds are due to mature in less than a year.
- According to an SEC filing released Monday, the Shenzhen-based tech giant now owns more than 30% of the EV company through several subsidiaries, compared with the 13.3% stake it held at the end of 2018.
- Tencent had no choice but to convert debt into equity to avoid losses, as it would seriously endanger Nio to pay out the debt in September given its cash balance is only adequate to ensure operations for a few months, David Ho, founding partner of Guangzhou Xiuyong Enterprise Consulting Co., Ltd said when contacted by TechNode on Tuesday.
- Ho estimated Nio will need to fill a funding gap of up to RMB 5 billion ($720 million) to survive the year. However, there is little hope of major financing from Chinese state-owned automakers.
- “This presents a high political risk for the heads of Chinese state-owned automakers,” (our translation) Ho said, adding that established OEMs now have to invest heavily to save themselves and dealers from the ongoing coronavirus outbreak.
- Nio and Tencent declined to comment.
Context: Chinese biggest EV maker, BYD, on Monday reported EV sales falling by more than three-quarters to 7,133 units in January from the same period last year.
- Meanwhile, BJEV, the EV unit of Daimler’s Chinese partner, recorded a 55.5% drop in sales to a mere 2,006 units last month.
- Cui Dongshu, secretary-general of the China Passenger Car Association, forecasted a 15% to 25% decline in China auto sales in January due to the outbreak.