Chinese smart electric vehicle (EV) start-up Nio has sent dozens of employees to some of its vendors to help minimise future supply-chain constraints after production was recently disrupted for the fifth time this year.
In October, Nio’s factory – the JAC-Nio Advanced Manufacturing Centre in Hefei, the capital of east China’s Anhui province – ran short of vital components for the ET5 sedan as the country’s zero-Covid policy forced some suppliers to down tools.
Although now resolved, that and four previous disruptions to production this year were enough to rattle investors and customers. Nio’s shares have plummeted since their debut in March, while deliveries of cars slumped recently.
William Li, co-founder and CEO of the Shanghai-based carmaker, attempted to soothe investors’ and customers’ concerns about its manufacturing capability by pledging to increase output during a speech on Sunday.
“We have deployed dozens of employees to our partners so as to help them increase production of components,” he told customers at the opening ceremony for a new showroom in Dongguan in southern China’s Guangdong province, according to a company statement.
Li, pictured here in January 2021, said the company hoped to allay concerns about slow progress in expanding Nio’s capacity. Photo: AFP
He said the company hoped to allay concerns about slow progress in expanding Nio’s capacity.
Nio, along with Guangzhou-based Xpeng and Beijing-headquartered Li Auto, is regarded as China’s best response yet to US carmaker Tesla, which is the runaway leader in the country’s premium electric car segment.
But the carmaker’s production has been disrupted by the Covid-19 pandemic five times this year as lockdown and virus control measures in cities like Shanghai forced its supply-chain vendors to halt operations or suspend work in some of their facilities.
Analysts and customers have suggested Nio maintain an adequate inventory of key components to minimise the potential impact of pandemic curbs.
However, Li said the company runs a made-to-order business model and would not normally keep a large stock of spare parts.
He admitted Nio’s business model is distinct from other Chinese carmakers and must fine-tune its manufacturing process to adapt to the existing automotive supply chain.
“Investors and customers who were bullish on Nio and its vehicles will be disappointed if the company fails to deliver enough cars to execute customers’ orders,” said Gao Shen, an independent analyst in Shanghai. “Storing some extra car components for future use is still an option.”
In September, Nio delivered 10,878 vehicles, up 1.9 per cent from a month earlier. The delivery volume declined in October, sliding 7.5 per cent to 10,059 units.
The company said production had returned to normal this month after the problems at the Hefei plant.
In the first 10 months of this year, Nio delivered 92,493 vehicles to customers, up by a third from a year ago.
But it is likely to miss its full-year sales target of 150,000 units, said Gao.
Tesla’s Shanghai Gigafactory, which started operations three years ago, delivered 71,704 vehicles in October alone, up 32 per cent on the year.
Last month, Tesla slashed the prices of its Shanghai-made Model 3 and Model Y vehicles by up to about 10 per cent to bolster sales after it expanded the production capacity of its factory in Lingang Free-Trade Area by 30 per cent to 1 million vehicles a year.
Nio’s Hong Kong-listed shares have halved from their initial public offering (IPO) price in March, ending 1 per cent lower at HK$79.4 (US$10.16) on Monday.
Keyword: Nio boss William Li pledges to up production after Chinese EV start-up faced yet more supply-chain disruption