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04.11.2023 07:57, Alexey Razin
By the end of November, NIO CEO William Li said this week, the relatively young Chinese electric vehicle maker will be forced to cut 10% of its workforce as the tough competitive environment pushes it to take such an unpopular step.
Image source: NIO
As NIO’s founder stated in a written statement treatment to his subordinates, “the coming two years will be the period of the strongest competition at a decisive stage of transformation of the automotive industry in conditions of complete uncertainty”. Over the past two months, NIO management has been reviewing its operating plan for the next two years and has been able to identify business priorities and identify ways to optimize it.
Priority will be given to investment in technology, and projects that cannot be profitable within three years will be eliminated. In addition, it is important for NIO to ensure timely entry into the market of new key products. Staff reductions, the necessity of which causes the head of the company sincere regret, are a difficult but necessary decision in conditions of intense competition. The “price war” that Elon Musk unleashed on the electric vehicle market earlier this year, sharply reducing the cost of Tesla products in China and other key markets, has tested many industry participants. NIO refrained from cutting prices until June, but then could not avoid them, and this became a serious test of strength for the remaining unprofitable automaker.
What areas of NIO’s activities will be forced to cut are not specified. The company recently received a license to produce smartphones as the practice is gaining popularity among Chinese automakers. In an effort to integrate the user ecosystem as deeply as possible, companies are ready to produce both vehicles and smartphones. NIO also develops traction batteries and semiconductor components, but these activities are important to the company’s core business.
In the first nine months of this year, NIO managed to sell about 110,000 electric vehicles, well short of its annual target of 250,000 vehicles. BYD, the leader in the Chinese market, sold more than 165,000 electric vehicles in October alone, and together with hybrids, this number reached 301,095 units. In China, owners of NIO electric vehicles can lease batteries and charge for free at branded charging stations; the company also installs express replacement stations for the traction battery with a charged one in megacities. The whole procedure takes no more than five minutes, is carried out automatically, and the driver does not even need to get out of the car. It is possible that the development of such infrastructure will have to be sacrificed in the context of budget savings.
In June, NIO managed to raise $738.5 million from the Abu Dhabi authorities in exchange for a 7% stake in the company’s capital. According to unofficial data, negotiations were underway to raise another $3 billion, and rumors even attributed the Chinese automaker’s intentions to cooperate with Mercedes-Benz.
2023-11-04 04:57:00
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