In the world of electric vehicle (EV) manufacturers, NIO Inc., one of China's pioneering automakers, has sparked a myriad of discussions regarding its financial health and sustainability after a decade marked by astounding losses amounting to approximately 100 billion yuan. As NIO celebrates its ten-year anniversary, questions arise among investors and industry watchers alike: who has borne the brunt of these staggering losses? The company's founder, Li Bin, initially projected that he would achieve a profit within ten years of its formation, along with an ambitious funding vision that encompassed around 20 billion yuan to kick-start the manufacturing process. However, financial statements reveal a starkly different reality, as NIO continues to grapple with ongoing operating losses and an inability to fulfill the original profit promise.

Founded on November 25, 2014, NIO emerged as China's inaugural "new force" in vehicle manufacturing. Shortly after, competitors such as Li Auto and Xpeng followed suit, establishing a triumvirate in the new automotive landscape often referred to as the "NIO, Xpeng, Li" lineup. On the occasion of NIO's tenth anniversary, Li Bin addressed his employees and customers in letters, expressing gratitude for the unwavering support from vehicle owners while acknowledging the significant gaps still present in achieving his company's goals.

Advertisement

As the first of its kind to go public on the U.S. stock market on September 12, 2018, NIO at one point boasted a staggering market valuation of approximately $140 billion. However, the company witnessed a devastating drop in stock price, plummeting from a peak of $66.99 to just $4.40 by December 2 of the same year. This marked a shocking depreciation of about 93.4% in stock value. By comparison, during the same timeframe, Li Auto's and Xpeng's market capitalizations stood at $24.19 billion and $12.05 billion, respectively. So, how did NIO, which once heralded its status as the industry's frontrunner, end up experiencing such a drastic decline in investor confidence?

As the Tide Recedes: How Many ‘New Forces’ Remain?

The electric vehicle market in China boomed in the wake of Tesla's success, with many attributing the phenomenon to the influential figure of Elon Musk. Back in April 2014, Musk was on stage presenting keys to the first Model S cars to Chinese consumers, which included industry stalwarts like Li Xiang, founder of Li Auto, and Yu Yongfu, who played a vital role in facilitating company projects for Xpeng Motors. The enthusiasm they imbibed from watching Tesla's story unfold arguably ignited a rush of EV startups in China, including brands like LeEco's Faraday Future and WM Motor, among others, demonstrating how quickly the automotive landscape was changing.

As the years progressed, Chinese real estate corporations and even appliance manufacturers began to get in on the action, leading to an explosion of new entrants in the EV sector. By 2018, the number of new auto manufacturers soared to an estimated 487 companies. However, the current reality paints a different picture; the number of players in the market has dwindled dramatically. The emergence of new competitors like Xiaomi and Huawei has ushered in a ruthless elimination phase of survival for many, forcing several initial players out of the race.

Notably, upon examining the remnants of the electric vehicle startup boom, only a handful remain. The survivors, often referred to as "4+1," consist of NIO, Li Auto, Xpeng, and Leapmotor, with Neta being the "1" in the equation. The performance of these brands reveals a mixed bag, with NIO still contending with ongoing challenges amid an otherwise competitive landscape.

The ASU reveals that well-known brands such as WM Motor, Byton, and many lesser-known competitors are now absent from the market. The pivotal question arises: who might be next to exit the field? Li Bin’s estimate of needing an initial investment of 20 billion yuan was seemingly just the beginning, as it became clear that the cash burn associated with the automotive game was far more substantial.

The Financial Footprint of NIO's Losses

NIO's financial troubles culminated in their third-quarter 2024 earnings report, wherein they disclosed revenues of 18.674 billion yuan, falling short of market expectations and presenting a year-over-year decrease of 2.1%. Notably, the net loss for this quarter reached 5.06 billion yuan, continuing a discouraging streak of four consecutive quarters with losses exceeding 5 billion yuan. Over the first three quarters of the fiscal year, NIO generated 46.03 billion yuan in revenue, yet still reported a staggering net loss amounting to approximately 15.53 billion yuan.

According to research, NIO has accumulated losses totaling 80.48 billion yuan from 2016 to 2023, with the substantial addition of losses from 2024 bringing the overall figure closer to 96.01 billion yuan. This staggering amount does not even account for initial losses incurred during the company's nascent years in 2014 and 2015, which are estimated to be in the billions themselves.

Although Li Bin previously claimed to have accrued significant wealth from his equities in car dealerships and the successful IPO of his online automotive platform, the desire and need for 20 billion yuan to launch an ambitious startup proved far greater than his singular wealth could comfortably withstand. While he dubbed the endeavor a "cause worth dedicating one's life to," it is understood that a substantial portion of NIO's initial funding stemmed from external investors.

Li Bin garnered substantial backing from influential industry figures. For instance, he obtained the enthusiastic financial support of Lei Jun, who famously declared that Li could "just reach out" when he needed assistance. Additionally, an influential aspect of NIO's early funding success came through a pivotal deal not only securing investment from various venture capitalists but also by successfully securing 7 billion yuan from investors in Hefei during a time when it was crucial for the company's survival.

Previously, Li Bin had indicated potential profitability timelines for NIO, predicting that the company would break even by the fourth quarter of 2023. This timeline proved to be overly ambitious, leading to subsequent revisions that moved the profitability goal to 2024 and then again to 2026. However, as cash flow continued to dwindle, the challenges facing the corporation loomed larger.

The Path of Continuous Losses

Since 2016, NIO's average annual losses have exceeded 10 billion yuan, with 2023 being particularly revealing. The company recorded vehicle sales of approximately 160,000 but incurred a staggering net loss of 21.15 billion yuan, averaging a loss of over 132,200 yuan per vehicle sold. Intriguingly, this suggests a paradox where selling more cars has resulted in even grander losses. Comparatively, NIO's overall losses amount to roughly 163,000 yuan for each vehicle sold throughout its trajectory.

The enormity of NIO's losses is compounded by Li Bin's expansive investments across various domains, including in-house battery production, development of laser radar technology, and the challenging infrastructure investment in battery-swapping stations. As of late 2024, NIO had established approximately 2,714 of these stations, each costing a minimum of 3 million yuan to develop, contributing to an almost astronomical sum in costs.

Additionally, excessive salary allocations pose another concern, as employee compensation totaled approximately 10 billion yuan in 2023, with research staff alone costing around 8.998 billion yuan — creating a salary range of approximately 600,000 to 800,000 yuan per employee. This represents a hefty expense consuming valuable resources each year.

Sales expenditures also mounted to alarming levels, with expenditures in research and sales combining to account for nearly half of the total revenue. Notably, while Li Auto and Xpeng efficiently allocated about 16% and 30% of their revenues, respectively, NIO maintained a staggering 47% — a stark reminder of unsustainable financial habits. This discrepancy continues to question NIO’s viability in generating profitability.

In the past, during NIO's stock price peak, Li Bin's personal wealth soared to around 45 billion yuan, yet recent estimates place his fortune at approximately 8 billion yuan, demonstrating a staggering drop of upward of 82%. This massive decline inevitably raises questions about his future leadership and strategy, which could impact the crucial decisions ahead for the firm.

Currently, NIO's grand aspirations pivot around battery production, chip development, and battery-swapping infrastructure, all requiring substantial financial investment. With continued losses in play, 2023 may be pivotal for NIO to revitalize its strategy and reassess future directions. As NIO embarks on its journey into the next decade of existence, the pivotal question remains: who ultimately shoulders the burden of NIO's monumental financial losses?