Electric vehicle investors got some concerning news about
NIO
Friday. It could have implications for
Tesla
and other EV peers. It might not. It will take investors a while to figure it all out.
Friday, Reuters reported that the Chinese EV maker is about to lay off 10% of its workforce.
NIO
(ticker: NIO) didn’t immediately return a Barron’s request for comment about the layoffs or the reasoning behind them.
A big cut at a significant EV maker in the world’s largest market for electric vehicles isn’t exactly great news. It could mean a few things: Waning demand, increasing competition requiring higher efficiency, or problems and plans related to NIO-specific issues.
Demand doesn’t seem to be the issue. Sales of battery electric vehicles, or BEVs, are up about 20% year over year in China. In recent months, BEVs have accounted for almost 25% of all vehicles sold.
But demand is only one side of the business equation. There is supply, too, and there are a lot of EV makers in China. A price war has raged in 2023 as companies are looking to preserve market share against the likes of
BYD
(1211.Hong Kong) and
Tesla
(TSLA). Both companies have grown faster than the overall Chinese market so far in 2023.
BYD BEV sales are up roughly 75% so far this compared with 2022.
Tesla
‘s Chinese sales are up about 45%. NIO sales are up about 36%.
The layoffs feel more about competition than demand. The report highlights “fierce competition.”
Investors seem to feel the same way, so far. NIO stock was up on the news. U.S.-listed American depositary receipts, or ADRs, were up 2.1% in premarket trading Friday while
S&P 500
and
Nasdaq Composite
futures were down 0.1% and 0.2%, respectively.
NIO stock has been on a nice run this week. Shares surged 4.6% Thursday on an up day for the market. The Nasdaq Composite gained 1.8%. That NIO gain came after a 2.1% jump on Wednesday after the company reported 16,074 units delivered in October.
NIO,
XPeng
(XPEV), and
Li Auto
(LI) combined delivered 76,498 units in October—a record for any month. Chinese EV leader BYD also delivered a record number of battery electric vehicles in October: 165,505.
Strong Chinese deliveries helped investors overcome some recent fears about a global EV slowdown. There are good reasons for the concerns such as on Monday when auto chip supplier
ON Semiconductor
(ON) guided fourth-quarter revenue down roughly 10% compared with the third quarter.
ON’s guidance pushed Tesla stock down almost 5% on Monday. Shares closed under $200 for the first time since late May. Strong deliveries in China helped Tesla stock rebound, too, gaining almost 11% from Monday to Thursday this week.
Strong October sales were good news. Weak guidance was bad news. NIO layoffs fall somewhere in the middle.
Write to Al Root at allen.root@dowjones.com
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