Investors love the Chinese electric car story

September 17, 2018 16:36
Nio has so far delivered only six EP9 units, all gifts to the company's six major investors. Photo: Bloomberg

Nio Inc., a Shanghai-based electric car maker, has seen its share price more than double after its debut on the US stock market last week. The carmaker, dubbed as China’s Tesla, now has a market cap of nearly HK$100 billion.

Nio, also known as Weilai in China, was founded by Li Bin in 2014. Li has no background in the automobile or industrial sector, but he is good at convincing investors. The company has wooed a number of high-profile investors including Tencent,, Xiaomi, Sequoia Capital and Hillhouse Capital.

Nio first introduced a “super car”, the EP9, in 2016. The EP9 set a new lap record of 6 minutes and 45.9 seconds at the Nürburgring, beating Lamborghini Aventador, Porsche 918 Spyder and Tesla Model S.

It’s not fair to make a direct comparison between EP9 and those cars. It’s widely known that it’s not difficult to produce a super car, but how to commercialize it and achieve mass production is much more complicated.

Nio has so far delivered only six EP9 units. All were gifts for its six major investors, including Li himself, Tencent’s Pony Ma,’s Richard Liu, and Xiaomi’s Lei Jun. 

The startup’s first mass-produced model is ES8, priced at 548,000 yuan (US$79,762). At that price level, Chinese consumers have many other options such as a Benz, a BMW or an Audi. 

The ES8 is not as chic as EP9 in function and design, and it is less fashionable and smarter than a Tesla car.

So far the company has only received 6,000 orders with non-refundable deposits.

It’s estimated that Nio has to deliver at least 30,000 ES8 units to reach a break-even point.

Its production capacity is also in doubt. The company has delivered around 1,000 units this year, against a production target of 10,000.

Limited sales and huge research and development expenses have resulted in heavy losses.

Nio booked a total loss of 10.9 billion yuan over the past three years, while its revenue from vehicle sales was only 46 million yuan in the first half of this year.

Meanwhile, Nio has outsourced most of its production processes to Anhui Jianghuai Automobile.

In a way, it's an innovative business model, but so far there has been no successful example to prove that such an outsourcing model will work well in the car industry.

Despite all that, Nio’s US$1 billion initial public offering has been received well. Its share price has doubled two days after its listing, giving us an idea of how much investors love the China electric car story.

A number of prominent Chinese entrepreneurs are also attracted to the electric car dream. For example, Xu Jianyin, the boss of real estate group Evergrande, has injected over 10 billion yuan into troubled electric car manufacturer Faraday Future.

Gree Electric’s outspoken chairwoman Dong Mingzhu and UCWeb browser founder He Xiaopeng have also poured lots of money into electric cars.

This article appeared in the Hong Kong Economic Journal on Sept 17

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist