Tue, Dec 27, 2022 page10

• Nio warns of challenges due to low China demand

  • Bloomberg
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  Nio Inc (蔚來汽車) founder and chief executive officer William Li (李斌) said the Chinese electric vehicle (EV) maker could face a challenging first half of next year as a cut in government subsidies and the broader economic slowdown erode local demand in the world’s largest new-energy vehicle market.

  Customers are likely to try to place orders before the end of the year, when the national subsidies for electric vehicles are expected to be phased out, Li said at a briefing after the company’s launch of its latest models at a weekend event in Hefei, China.

  “It will also take time for both the supply chain and consumer confidence to recover from the pandemic,” Li said, adding that he expects a full recovery in May or June.

  

  An employee works on the production line of Nio Inc at a manufacturing plant in Hefei, Anhui Province, China, on Aug. 28.

  Photo: REUTERS

  The Shanghai-based automaker’s production has been upended by the effects of COVID-19. China’s initial strict adherence to its “zero COVID-19” policy handicapped production, logistics and delivery, before the government’s reversal in policy led to a sharp increase in infections, forcing Nio to miss its annual delivery target of 150,000 units.

  The company needs “to actively strengthen our capabilities in demand forecast and rapid response” under the volatile and uncertain situation, Li said on Sunday.

  Nio aims to set up a system with suppliers to disclose inventory conditions for semiconductors and raw materials, as well as staffing, equipment investment and production capacity, he said.

  If there are changes in supply or demand, each player would be prepared to respond rapidly, Li said.

  Nio has taken precautions by storing more components, increasing orders from the original chipmakers and exchanging semiconductors with other automakers, Li said.

  He called on vehicle makers and suppliers to “reasonably place orders for chips” because of possible panic buying.

  COVID-19 outbreaks have the potential to cripple production and disrupt employee rosters, threatening the global supply of everything from vehicles and golf carts to kitchen appliances.

  Nio has in the past two years collaborated with component-making partners to support each other with workers when necessary, Li said.

  Deliveries of new-energy vehicles — pure electric and hybrid vehicles — to dealerships in China are expected to reach 6.5 million by the end of the year, and could hit 8.4 million next year, the China Passenger Car Association said at a briefing earlier this month.

  However, the year-on-year growth rate is slowing, and overall profit for the industry, excluding Tesla Inc, could be negative, given the huge spike in costs of raw materials for EV batteries, Li said.

  “There was in fact no actual shortage of EV batteries, at least not as severe as the chip shortage,” he said, adding that “it is obvious the upstream suppliers are making great profit, while carmakers like us are having a hard time.”

  Part of the reason for this is the lack of transparency in lithium pricing, Li said.

  Nio, which targets premium buyers for its vehicles, plans to roll out its first mass market model in 2024, he said, adding that the company is also focusing on developing and producing its own batteries and chips, he said.

  “You have to take the vertical integration of key components if you want to enter the mass market and make profit,” Li said, “otherwise it would not be possible.”
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