William Li, founder of Nio.
William Li has rejoined the ranks of the world’s billionaires as shares of his electric-car startup NIO rallied 472% since late May this year. The gains mark a dramatic comeback for a company that had earlier been struggling to boost sales, causing Li’s wealth to drop precipitously.
Dubbed the “Elon Musk of China,” Li has been waging a campaign of cutting costs and raising cash from investors for NIO, which still has yet to turn a profit. A capital injection of 5 billion yuan ($733 million) in June by investors including the local government of Hefei amounted to a much-needed lifeline.
The turning point came in May when Li reported stronger than expected sales of 1.37 billion yuan ($194 million) in the first quarter, and then predicted that revenue and shipments would more than double in the following quarter. It turns out that NIO’s deliveries actually tripled to a record 10,331 vehicles in the second quarter compared to a year earlier, and revenue rose to 3.72 billion yuan, as China’s auto market was showing early signs of a post-pandemic recovery. Nio’s soaring share price on the Nasdaq lifted Li’s net worth from $572.4 million on May 22 to its current level of $2.9 billion.
“The company is doing well this year. It found investment, accelerated new vehicle launches, and kept up good service quality,” said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight.
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Li continues to be optimistic that NIO will maintain its momentum. He predicted during an analyst call in August that the car maker would deliver up to 11,500 vehicles in the third quarter. He also said NIO’s gross margin would improve to double-digits as a result of rising sales and cost reductions in its parts supply.
Investors appear to be willing to look past NIO’s near-term losses and focus on it potential for future growth. In August, the company boosted the size of its American depositary share offering by 20%, selling 88.5 million shares at $17 apiece.
Teng Yong, a Shanghai-based partner at consultancy Oliver Wyman, said bullish market sentiment towards EV companies could pave the way for any new fundraising activities. Buoyed by strong sales, Tesla surged almost sixfold this year, making founder Elon Musk the world’s fifth-richest person with a net worth of $85.8 billion.
The NIO Inc. ES6 electric sport utility vehicle (SUV) stands on display at the Auto Shanghai 2019 … [+]
Meanwhile, NIO’s local rivals Xpeng and Li Auto both enjoyed stellar debuts after deciding to list in the U.S. this year. Xpeng founder He Xiaopeng now has a net worth of $4.1 billion, up from $1.2 billion prior to the company’s IPO on the NYSE. Li Auto’s founder Li Xiang became a billionaire for the first time in July after his company raised $1.1 billion through a listing on the Nasdaq.
Sales of new-energy vehicles in China began to recover this year after the Covid-19 pandemic was brought under control. Consumers bought a total of 98,000 such vehicles in July, up 19% from a year ago, according to the China Association of Automobile Manufacturers.
“Last year, people were worrying that NIO didn’t have enough cash to last for another year,” Teng said. “Now, you can see from the capital markets that investors are optimistic for electric car companies.”
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But Li still faces considerable headwinds. Competition, for one, is getting increasingly intense. By pricing his electric SUVs at a range of 358,000 to 558,000 yuan, the billionaire car builder is targeting China’s wealthier consumers–a market segment Tesla also hopes to win with its locally manufactured Model 3s, said John Zeng, a Shanghai-based director at consultancy LMC Automotive.
The Model 3 has been priced between 271,550 to 419,800 yuan, after delivery from Tesla’s Shanghai factory, which kicked off in late 2019. Zeng estimates that the company has been able to sell more than 10,000 cars a month in China since April. “Tesla definitely has a brand advantage,” he said.
NIO didn’t respond to emailed requests for comment on how it intends to keep ahead of its competitors. In July, the company launched its new EC6 model, a 5-seater electric coupe SUV that has a starting price of 368,000 yuan. The company is also building a novel battery service. In August, NIO began to allow consumers to buy its cars without battery packs, allowing them instead to have the option of renting the components later for a monthly fee at its battery-swap stations.
“Tesla has better and more convenient charging stations in China,” said Automotive Foresight’s Zhang. “NIO, on the other hand, is doing battery swaps. We are waiting to see if this will drive sales.”
