Chinese EV maker Nio Inc. (NIO) seeks to spin off its EV battery manufacturing segment by the end of 2023, according to a Reuters report. Yahoo Finance Anchors Brad Smith and Diane King Hall talk about Nio’s profitability concerns and how this move may set it apart in the electric vehicle landscape.
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Video Transcript
– Nio reportedly spinning off its battery manufacturing business, that is according to Reuters. The unit will seek external investors in the split, which could reportedly happen as early as the end of this year. The valuation will be decided later.
And this comes after the EV maker reported its Q3 earnings this week, where it lowered its revenue guidance for the fourth quarter. Since the company was founded in 2014, it has yet to make a profit. And this amid many of the pricing wars that have impacted across the board these EV manufacturers.
And Nio, as well, as Lucid some of those that have struggled, Rivian, as well, to a predicted deliver and produce on many of these vehicles while also showing that they can be profitable in that effort. That’s where it’s going to be certainly at the top of minds of investors how they’re able to ultimately get so many of these vehicles into driveways into garages.
But ultimately, at the end of the day, continue to see that free cash flow positive nature that they’re seeking at this point in time.
– Right, exactly. And Nio as not produced that yet as you just mentioned. But we were looking at its ADR here because, obviously, it trades as an ADR here in the US. So up more than 2%, so it is being rewarded for that decision that it’s made– made this Reuters report about spinning off its battery manufacturing unit, which wasn’t originally expected.
I mean, they were planning to originally do that in-house and have some of it outsourced like Tesla does, for instance. But this is an effort. It seems to help it become profitable sooner than where it is right now, especially when you think about where Nio is and to your point about deliveries and what Nio needs to do to stand out in the EV space.
I mean, they’ve delivered 55,000 vehicles in the third quarter. They need to scale, just like the other EV makers need to scale. And they need to ship out more in order to become profitable. So cutting off or spinning out that piece of the business can help them, certainly, in that respect right. And battery manufacturing doesn’t have to be a big part of its business, clearly.
– Yeah, well, and it’s all going to come back to lithium prices. Lithium prices actually getting back to some of the lowest levels we’ve seen since 2021. So we’ll see exactly what this spells out more broadly for that EV battery production across the board here.