Covid is still messing up the global supply chain and production, particularly in the popular electric vehicle segment, where a major Chinese EV maker continues to feel the crush of factory shutdowns and delayed parts.
The effects of China's 'Zero Covid' policy, which continues to wreak havoc on production of goods in China and is responsible for a signifiant dip in economic growth, is making it tough for carmakers, particularly those who make electric vehicles, to get their cars into peoples' driveways.
It's also messing with Chinese electric vehicle maker Nio's (NIO) plans to take on rival Tesla (TSLA).
Nio on Wednesday said it lost $409.8 million in the second quarter, representing significantly widening losses, despite deliveries that surpassed year-ago levels and that were ahead of the company’s own guidance.
Nio's American depositary receipts trading in New York were down about 5% in premarket trading after the company reported second-quarter gross margin of 13%, significantly lower than the 14.6% gross margin it reported last quarter and the 18.6% it saw in the second quarter of last year.
Covid Shutdowns in China Continue to Bite
Nio blamed “cost volatilities” related to Covid shutdowns in China, which it said affected both production and overall sales and deliveries.
Those cost pressures, plus increased spending on its recharging and service networks, dented Nio’s gross margin, the company said.
Nio previously announced it delivered 25,059 vehicles in the second quarter, slightly fewer than in the first quarter but above its own guidance. The company was only able to deliver about 12,000 vehicles in April and May combined as Covid shutdowns hampered production and supply lines. It delivered 21,896 vehicles during the second quarter last year.
The reason: Covid, in part, which continues to snare production and supply chains in China as the Chinese government sticks with its Zero Covid policy, meaning mass shutdowns and quarantines at any sign of a viral outbreak.
Chief Executive William Bin Li said in a statement Wednesday that the second half of 2022 is a “critical period” for the company. Deliveries of Nio’s new SUV, the ET7, hit full speed last month, he said, and production of the new ET5 sedan is on track to begin at the end of September.
Nio Continues to Gun for Elon Musk's Tesla
Getting back up to full speed and getting its EVs out of the factory continues to be a core focus for Nio, which sees itself as a chief rival to Elon Musk's Tesla.
With production back to full tilt, at least for now, Nio expects to deliver between 31,000 and 33,000 vehicles in the third quarter and to generate revenue between $1.9 billion and $2 billion in the period, the company said.
Nio in June rolled out its ES7 smart electric mid-large SUV, according to a company statement.
The ES7 has a starting sale price of about $69,700, comparable to Tesla's Model 3. Preorders began on June 15 on the Nio app; deliveries were expected to begin late last month.
Nio presents a challenge to Tesla's autopilot and Full Self-Driving features, as it introduces Nio Autonomous Driving, which it says will gradually achieve a safe, reassuring, point-to-point autonomous driving experience on highways, in urban areas, parking and battery swapping.
The EV maker envisions an interior "second living room" with a spacious cabin, a double S-shaped instrument panel with use of sustainable rattan. Front seats have heating, ventilation and massage functions. Heated rear seats are also standard with power-adjusted seatbacks.
