The share price of Chinese EV startup NIO fell by 5.8% to $1.46 on October 16, which marks the largest decline in the past six days. Meanwhile, the Wuxing District of Zhejiang province has terminated further cooperation with NIO following earlier rumors of negotiations.
Recently, the EV company has experienced some turmoil including massive layoffs, personnel changes, and a declining stock price. However good news came on October 15. According to a report from Sci-Tech Innovation Board Daily, NIO has attracted investment from Beijing E-town International Investment & Development Co., Ltd, after the company’s negotiations with Wuxing District of Huzhou City, Zhejiang province for 5 billion yuan of financing broke down.
It was also rumored that the 5 billion yuan of financing from Wuxing District would have been used to augment NIO’s manufacturing capacity with a new factory capable of producing 200,000 vehicles annually. After the termination of these negotiations, the company will have to look for alternative sources of investment. William Li, founder and CEO of NIO replied to the rumor, stating that NIO has indeed made several contacts with local governments.
Regardless, on the evening of October 16, investors were shocked by news of the break down in negotiations between NIO and Wuxing. Insiders from the government disclosed to the media that the two parties indeed had some negotiations, however ceased to make further moves due to high assessment risks.
Without the investment, NIO’s future prospects remain uncertain. Since September 20, NIO’s share price has fallen by 50%, while the decline from its highest point as a public company has exceeded 90%.
The predicament of NIO is not unique to the company, as the entire EV industry is going through a difficult period. According to a report by Bloomberg in June 2019, a bubble exists in China’s electric vehicle industry due to market overcrowding and saturation. Currently, there are 486 registered EV companies in China, and in the years to come, it is likely that various underperforming companies in the space will be experience significant challenges to their future prospects and development.