To The Moon

BEIJING, November 3 (TMTPost)— Nio Inc has to resort downsizing in face of stiff competition even though the Chinese electric vehicle maker has claimed it would not cut workforce whiling improving efficiency.

Credit：Visual China

Nio will lay off 10% of employees and the related personal adjustments will complete this month, the Chairman and CEO William Li, or Li Bin, said in a letter to staff on Friday. The coming two years will be the most competitive period during an ongoing transition of the auto industry, and the broader environment is filled with elevated uncertainties, Li noted at the beginning of the letter.

The 49-year co-founder admitted Nio has obtained more than 40% share in the battery electric vehicle market priced RMB300,000 above, following five new models delivered this year. But he seemed unsatisfied, noting that overall performance still falls short of expectations. “To be a winner qualified for the finals, we must further improve execution efficiency, and make sure enough resource to input in key businesses,” Li concluded. 

In the past two weeks, Nio has drawn up specific plans for organizational and business optimization, including to ensure long-term investments in core technologies and maintain leadership in technology and products, to make sure adaption of the sales and service teams to the fierce competition, and to keep nine core offerings under three brands well on the track to launch as scheduled, Li told employees in the letter.

Based on these priorities, Nio plans to make efforts for optimization in two directions: one is for organization, specifically speaking, to merge overlapping departments and positions in the organization, reform inefficient internal work processes and division of labor, and eliminate inefficient positions; another is made to improve resource efficiency, which requires to delay and reduce investments in projects that fail to upgrade the company's financial performance within three years, said Li, adding that decision of the layoff was made due to the aforementioned plans. He felt sorry for the job cuts, which will affect certain workers, and called for understanding of the tough decision amid the cutthroat competition.

 Li Bin’s letter confirmed recent news about Nio’s layoff. The Shanghai-based company was said to axe 10% to 20% of workforce, which was echoed by employees at Chinese LinkedIn-like platform Maimai,. Nio cofounder and President Qin Lihong latter responded most of news spread online was not true, but admitted his company is seeking improving organizational efficiency, signaling job cuts’ looming.

The new round of cuts is unsurprising. Nio went on a hiring spree during the Covid-19 pandemic. The company’s workforce swelled to 30,000 to the date, doubling two year ago. However, the headcount expansion didn’t pay off. Li Bin has recognized preliminarily there were insufficiency problems inside in the beginning of the year. His wrote a letter at that time to warn employees that it is urgent to improve internal communication efficiency as the team has expanded too fast in the past year.

Founded in 2014, Nio has never turned around and is still struggling for profitability. In a financial report released in August, the EV maker posted worse-than-expected financial results in the quarter ended June 30. Total revenue that quarter fell 14.8% year-over-year (YoY) to RMB8.77 billion, and the non-GAAP adjusted net loss per share was RMB3.28, more than doubling the loss in the same period a year earlier. Gross margin in the June quarter plunged 12 percentage points YoY to 1.0%, and vehicle margin was 6.2%, compared 16.7% a year earlier.

However, Nio predicted a turnaround in the third quarter. It expected delivery to be between 55,000 and 57,000 vehicles, representing an increase of about 74% to 80.3% YoY. Total revenue this quarter was expected to grow 45.3% to 50.1% YoY to a range of RMB18.9 billion and RMB19.52 billion. Both the delivery and the revenue are set to hit quarterly record. Li Bin said Nio aims to deliver monthly sales of 30,000 vehicles, and through its effort of building sales team, the company will have that initial capability of sales ready by the end of September, then the real effect will kick in from October.