Chinese electric car manufacturer, Nio, announced on Monday that it will be reducing the prices of its vehicles by $4,200 and will no longer offer free battery swaps for new buyers. This decision contradicts CEO William Li’s previous statement in April, where he claimed that the company would not engage in a “price war.” The move by Nio follows earlier price cuts by Tesla and other electric vehicle companies in China, all of whom are attempting to attract more buyers.
Furthermore, the company’s decision to delay capital expenditure and some research and development projects due to a fall in cash flow from fewer car deliveries has also caused concern among analysts, with some suggesting that the company’s decision to cut non-core projects has been too slow. The analysts have also predicted that Nio could face a dilemma between brand positioning and profitability, as the decision to cut service benefits could have a negative impact on the company’s brand image.
Nio’s deliveries in May fell to 6,155 cars, down from the first-quarter average of just over 10,000 vehicles per month. However, the company has announced that it aims to deliver at least 20,000 cars per month in the second half of the year.
Despite these challenges, Nio remains well-positioned with multiple upcoming ramps, including its lowest-cost SUV ES6, a multi-year EV adoption tailwind, market leadership in premium EVs in China, expansion into the EU/global markets, and an expanding product portfolio. Mizuho Securities has maintained its buy rating on Nio, but lowered its price target from $25 to $20 a share. However, the company’s shares are down by approximately 20% for the year so far, at $7.73 a share.
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