(Bloomberg) -- Unprofitable Chinese electric carmaker Nio Inc. may undertake further job cuts to reduce costs and improve efficiency, people familiar with the matter said, just weeks after the company announced plans to eliminate 10% of its workforce.
Some departments were asked to prepare reserve lay-off lists, which may widen the original dismissals to 20% to 30% within the unit, some of the people said, asking not to be identified because the deliberations are ongoing and aren’t public.
Any cuts would mainly apply to non-core businesses or those requiring heavy investment that won’t generate quick returns, the people said, adding that other more central parts of Nio’s business, like sales, are still hiring.
Once considered one of the brightest rising stars in China’s electric vehicle market, Nio has been falling badly short of its sales targets and continues to post losses. There were 26,763 full-time staff at the company at the end of 2022, according to its latest annual report. In addition to EVs, its businesses include battery and semiconductor manufacturing, and mobile phones.
Some international expansion plans, including entering the US market, have also been delayed or suspended, one of the people said, noting those changes took place earlier this year. Nio on Tuesday forecast revenue for the fourth quarter of up to 16.7 billion yuan ($2.3 billion), short of the 21.4 billion yuan average estimate from analysts.
A Nio representative said there hadn’t been any additional job cuts, adding the company will continue to make “dynamic adjustments” in the markets in which it operates.
Nio’s gross margin dropped to as low as 1% in the second quarter however recovered to 8% in the three months through Sept. 30. The company had a goal of shipping 250,000 EVs this year, but through November had only shipped 142,026.
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In a letter to staff explaining the earlier jobs cuts, Nio’s founder and Chief Executive Officer William Li said the move was “a tough but necessary decision against fierce competition.”
He also detailed plans to improve organizational and resource efficiency, such as consolidating duplicate departments and roles, eliminating some positions, and deferring or cutting investments in projects that won’t contribute to the company’s financial performance within the next three years.
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Li said earlier this week that Nio has “identified opportunities to optimize our organization, reduce costs and enhance efficiency.” He said the automaker has around 5,700 employees in sales, with over 3,000 of them being added in the past few months. He also said that Nio will only focus on the overseas markets that it’s already entered.
Any plan for further jobs cuts suggests Nio is continuing to burn cash, even after an Abu Dhabi government-backed investment fund injected $738.5 million into the company in June in return for a 7% stake. In September, the automaker sold $1 billion of convertible bonds, and Bloomberg News reported it was considering raising a further $3 billion from investors. Nio at the time said it had “no reportable capital raising activity” apart from the convertible bond sale.
Last month the Securities Times reported that Nio President Qin Lihong said that the automaker closing down is “absolutely impossible,” citing comments he made at November’s Guangzhou auto show.
Founded in 2014, Nio’s strategy includes splashy showrooms with exclusive lounge-like spaces called Nio Houses, where EV owners can get complimentary beverages and take social classes. Other membership-like benefits include free battery-swapping, charging and roadside assistance.
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Nio has been scaling back those services as financial pressures mount. On Wednesday, Reuters reported that Nio is planning to spin off its battery manufacturing business, possibly before the end of this year, citing people it didn’t identify.
During this week’s earnings call, Li said Nio will continue in-house development of cells, battery materials and packs, but will outsource production.
The Shanghai-based company is also striking deals with other carmakers to boost revenue. It recently signed agreements with Chongqing Changan Automobile Co. and Geely Automobile Holdings Ltd. to partner on battery-swapping technology. Li said Nio hasn’t ruled out the possibility of separately funding or listing its power business.
--With assistance from Linda Lew.
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