NIO’s Sales Increase Could Jeopardize Company

(Source: NIO)

Chinese EV-maker NIO seemed to have found stability when its third quarter 2019 financial report displayed a higher-than-expected revenue of 1.84 billion yuan and a lower-than-expected loss of 2.939 billion yuan. However, on the evening of March 18, 2020, NIO released its latest financial report showing that the company’s fourth-quarter revenue fell year-on-year, while losses mounted. To make matters worse, NIO’s debt and funding pressure is now in hot water as its total liabilities exceed its total assets.

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According to the financial report, NIO’s total revenue in 2019 was 7.842 billion yuan, a year-on-year increase of 58%. The total revenue in the fourth quarter reached 2.848 billion yuan, an increase of 55.1% month-on-month and a decrease of 17.1% year-on-year.

Behind the increase in revenue is an increase in the number of vehicle deliveries. According to NIO’s official website, 8,224 vehicles were delivered in the fourth quarter of 2019, and a total of 20,565 vehicles were delivered throughout the year. In comparison, in 2018, NIO delivered only about 11,000 vehicles.

NIO is currently a leader among new Chinese EV companies in terms of delivery data. While it delivered over 20,000 units, its competitor WM motor delivered only 16,876, while Xpeng, another EV-maker operating in the lower end of the market, delivered 16,608.

However, even though NIO sells more cars than its competitors, it has been struggling to reduce its automobile production costs. The companies rise in sales has also increased its losses. According to the financial report, NIO’s net loss in 2019 was 11.295 billion yuan, an increase of 17.2% year-on-year. The operating loss for the whole year was 11.792 billion yuan, an increase of 15.5% year-on-year; while the operating loss for the fourth quarter was 2.862 billion yuan, an increase of 17.3% from the third quarter of 2019.

The increase in losses was mainly due to the significant increase in costs.

Furthermore, according to NIO’s financial report, at the end of 2019, its assets were worth 4.928 billion yuan, while liabilities amounted to 9.499 billion yuan. The company’s assets to liabilities ratio of 0.519 indicates that it only had 0.519 yuan in assets to repay every 1 yuan of debt.