By Katrina Hamlin
HONG KONG: Nio‘s pending European road trip could sap its batteries. Results released on Tuesday show the Chinese electric-car maker moving fast. But founder William Li’s plan to venture overseas means starting almost from scratch all over again.
The upstart had a strong 2020: Revenue doubled, sales costs fell to 88% of the top line from 95% and operating expenses dropped by a third. That reduced the company’s net loss by more than 50% to under $1 billion. Several bouts of capital-raising allowed Nio to end the year with $6.5 billion in cash, and it has added $750 million since – despite a rush of rivals including Li Auto and Xpeng vying for funding. The company is now worth $78 billion after a 12-fold jump in its shares since the start of last year.
In some respects, Europe is a worthwhile new frontier for Li. The continent accounted for 46% of the 3 million electric vehicles sold last year, according to Bernstein. And it’s set to grow quickly: More stringent emissions rules are coming into force and several countries will start limiting or banning sales of new fossil-fuel-powered cars within a decade.
But a European jaunt won’t come cheap if Nio follows the same strategy it has pursued at home. It styles itself as an exclusive members club, touting services such as battery swapping and private clubhouses for car owners. A quarter of the $1 billion raised in its 2018 listing was earmarked for marketing and showrooms, according to the prospectus.
If Nio decides to build its own cars there, it’ll need a factory, which won’t come cheap. There’s also plenty of competition in Europe for high-end electric vehicles, with Tesla , Daimler, Audi, Porsche, BMW and others all battling it out. They all have one thing Nio doesn’t: a recognised brand.
Overcoming that, and perceptions of the quality of Chinese goods, will be costly. Meanwhile, Li wants to increase spending that was cut last year, not least on research and development. The company also forecast sales growth could drop again, from 45% in the fourth quarter, compared to the previous three months, to as low as 15% to the end of March. If Li accelerates into Europe too quickly, he still risks running low on power.
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CONTEXT NEWS
– Chinese electric-car maker Nio on March 2 reported a net loss of 5.3 billion yuan ($812 million) for the year ending Dec. 31, down 53% from 11.3 billion yuan a year earlier. Vehicle sales grew by 106% to 15.2 billion yuan in the same period.
– In a conference call following the results release, the company said it will enter the European market this year, and has also conducted research into entering the U.S. market.