China has spent years attempting to catch up with the rest of the world to produce their own vehicles, but never saw much profit. Most of the world still looked to Germany, Japan, and the United States for their cars. However China is making a comeback when it come to electric vehicles and the country hopes to lead the way.
Now it’s at a turning point.
Next year, the government is ending the subsidies that have supported the industry’s growth, dangling a question mark over the future of the country’s almost 500 EV makers. The biggest companies are certain to weather the ride, but what of the new players, inspired as much by China’s new internet economy as its powerful manufacturing base? The most prominent of these is NIO—a five-year-old startup making its name as a premium brand—which has cultivated a devoted fan base, and managed to meet its delivery goals for last year, all without even having its own factory.
The question now is how sustainable NIO’s path can be. Startups like NIO don’t have traditional manufacturing experience and are burning cash to build market share just as China’s auto market is slowing down. Last year the company had a net loss of $1.4 billion, and the stock is now at around a third of its all-time high when it listed in the US in September. It just closed its San Francisco office, shedding about 70 employees (pdf, p. 13) there and in Silicon Valley as part of a 3% layoff this year.
NIO is due to update investors on where things stand with its two-pronged approach on Tuesday (May 28), when it releases its first-quarter earnings.
Companies like NIO are reshaping China’s auto industry in the mold of the tech industry—with executives coming from China’s internet companies, they understand users, but not necessarily car manufacturing, a capital-intensive process. Chinese social media giant Tencent is one of its major investors, while search service Baidu is another.
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