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Nio banks on IPO to accelerate electric car manufacturer into profit

By Cao Yingying | China Daily | Updated: 2018-09-17 10:39
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A Nio ES8 SUV is displayed at a shopping mall in Wuhan, Hubei province. [Photo by Chu Lin/for China Daily]

Nio's initial public offering has brought the Chinese electric carmaker greater financial support.

However there still remain fierce challenges in the development process, according to industry analysts.

The company priced its shares at $6.26, just above the lower end of its $6.25 to $8.25 target price range on Wednesday on the New York Stock Exchange.

The shares rose to $9.90 on Friday before closing.

"The IPO is important for Nio because it is burning a lot of cash every year. The raised $1 billion can support the company for half to one year," according to Yale Zhang, managing director of consultancy firm Automotive Foresight.

The startup incurred a net loss of 3.3 billion yuan ($481.57 million) in the first six months of 2018, which was 1.3 billion yuan more than in the same period last year.

Its combined net losses since 2016 stand at 10.9 billion yuan. Zhang said that Nio should release affordable mainstream models as soon as possible, which will help the company expand sales and earn money.

Nio began deliveries of its ES8 SUVs in June and had sold 1,602 units by the end of August. William Li, CEO and founder of the company, said that they will deliver 10,000 ES8s by the end of this year in an interview with Sina Finance on Wednesday.

Li said that the IPO is a big challenge for a 4-year-old startup, especially in the mature and highly-competitive auto industry.

The IPO is just the first step for the company. What is more important is that Nio doesn't show leading advantages quality, driving range and delivering in mass quantity, according to John Zeng, managing director of forecasting and marketing consultancy LMC Automotive Shanghai.

More traditional carmakers have begun to target the electric vehicle market and have achieved good results in some areas, he said.

According to statistics from the China Association of Automobile Manufacturers, a total of 777,000 new-energy cars were sold in the country in 2017, up 53.3 percent year-on-year. Sales of 1 million are expected this year. The data from carmakers' EV plans shows that their combined annual production capacity will surpass 20 million by 2020.

At that time, Nio will find it tough to survive in the market if it still has no outstanding advantages, as its competitors have the capacity to mass producing electric vehicles, Zeng added. Zhang at Automotive Foresight said that it may be a catastrophe for EV startups to try and compete with premium auto manufacturers, such as Mercedes-Benz, BMW and Audi, which have already announced plans to produce electric vehicles.

BMW's joint venture, BMW Brilliance Automotive is planning to produce the all-electric BMW iX3 by 2020.

Mercedes-Benz announced in late February an investment of over 11.9 billion yuan with its Chinese partner BAIC to build a second production facility in Beijing to produce gasoline and electric cars, and its first battery-powered EQ series model EQC will roll off the production line in China in 2019.

Zhang explained that when it comes to spending a lot of money, customers often look to brands with a long history and good reputation, rather than a startup.

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