Price war and stiffening competition force Nio to reorganize
It has been in the news more than once in recent months. Demand for electric cars is lagging behind and a price war is intensifying competition. Ford has already put the brakes on its EV activities and other EV brands are also having a harder time this year than in previous years. The EV malaise now also seems to be killing its first victims in China. In the country where around 60 percent of all EVs sold worldwide have been on the road since the start of electrification in the automotive industry, the first EV manufacturer has now announced a round of layoffs. Nio, the company’s CEO announced in a letter to employees, wants to dismiss about 10 percent of its employees this month (November, ed.).
Marathon on a muddy road
According to CEO William Li, this decision is the result of tough competition among EV manufacturers. Therefore, the company must adjust its short-term plans for the next two years. Li calls Nio’s journey a marathon on muddy roads. The competitive battle, lowering prices – all Nio models in China recently became about 4,000 euros cheaper as a result of competition with Tesla and other brands – are forcing Nio to revise its strategy for the coming years.
To ensure that Nio can continue to participate in this hardening market, the company has had to redefine a number of priorities. Reducing the workforce, including by merging ‘duplicate’ departments and deploying staff more efficiently, should provide ample opportunity to continue long-term investments in core technology. Only in this way can Nio say it can keep its sales and service organization competitive and ensure that the planned new EV models are ready for the market on time. Projects are also being scrapped for which it is already clear that they will not contribute to the financial results for the next three years.
Workforce of almost 27,000
Nio is the Chinese EV manufacturer with the most employees. At the end of 2022, Nio employed nearly 27,000 people. About 2,700 of them are expected to lose their jobs this month. The brand is also active in the Netherlands, but sales of Nios are not yet booming here. The company distinguishes itself from the competition by offering customers the opportunity to exchange their batteries when they are empty at so-called battery exchange stations. That takes fifteen minutes and is therefore faster than charging at a (fast) charging station.
This year (until September), about 96 percent of the approximately 11,000 Chinese EVs sold in the Netherlands were from BYD, Geely (Link&Co) or MG. The number of Nios that left the showrooms in the Netherlands this year was still under 200 at the end of October. In 2022, that number would have been several dozen, calculated over the entire year. That was the year in which Nio first entered the Dutch market.
“I am sorry to the colleagues who may be affected by the adjustments. This is a difficult but necessary decision that is inevitable given the stiffening competition. Our journey is a marathon on a muddy road,” said William Li about the impending reorganizations and layoffs.