(Bloomberg) — Nio Inc. said it is cutting jobs and and may spin off non-core businesses to reduce costs and improve efficiency, as the Chinese electric-vehicle maker falls way short of its sales targets and continues to post losses.
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Shanghai-based Nio will cut 10% of staff positions in November, according to an internal letter signed by founder and Chief Executive Officer William Li seen Friday by Bloomberg News. “Duplicate” and “inefficient” roles will be eliminated, and project investment that won’t contribute to the company’s financial performance within three years will be deferred or cut, Li said.
The company’s US-traded stock rose as much as 3.2% in pre-market trading.
Once considered one of the brightest rising stars in China’s electric vehicle market, Nio has been falling badly short of its sales targets and continues to post losses. There were 26,763 full-time staff at the company at the end of 2022, according to its annual report. In addition to EVs, its businesses include battery and semiconductor research and development, as well as mobile phones.
The decision to trim employees and consider shuttering units reflects strains in China’s wider EV market, the biggest in the world, as increasingly dominant BYD Co. and the likes of Tesla Inc. squeeze out smaller players. A price war instigated by US-based Tesla a year ago amped up the pressure, with others following by slashing prices too in a race to attract customers as sales showed signs of slowing.
“This is a tough but necessary decision against fierce competition,” Li wrote in the letter. “Our journey is a marathon on a muddy track.”
Read more: Nio Has Been at the Brink Before. Can the EV Maker Rally Again?
The Chinese carmaker is in a fight for survival after intense competition in the nation’s automotive industry over the past two years. Li wrote that to “qualify for the next round of competition,” the company must reduce costs and ensure resources for critical business areas. He also apologized to the colleagues who will be affected by the adjustments, according to the letter.
Nio has a share of about 2.1% of the Chinese new-energy vehicle market, which includes hybrids, selling about 110,000 EVs in the first nine months of this year, well short of its annual target of 250,000 cars. By comparison, BYD sold over 165,000 fully electric cars in October alone, rising to 301,095 when including its hybrid sales.
Founded in 2014, Nio’s strategy includes splashy showrooms with exclusive lounge-like spaces called Nio Houses, where EV owners can get complimentary beverages and take social classes. Other membership-like benefits include free battery-swapping, charging and roadside assistance.
Read More: How China Carmakers Came to Dominate the EV Industry: QuickTake
Nio has been scaling back those services as financial pressures mount. The automaker still hasn’t ever posted a profit, and last quarter suffered a bigger-than-expected loss of $800 million. Its market value has slumped to $13 billion from a peak of $99 billion in February 2021.
Nio’s gross margin dropped to as low as 1% in the second quarter as the price war intensified. In June, Nio raised $738.5 million from the Abu Dhabi government for a 7% stake in the company, and it has considered trying to bring in more funds. Bloomberg News reported in September that Nio had approached investors in the Middle East about raising a further $3 billion.
–With assistance from Ocean Hou.
(Updates with share move, details from company letter.)
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