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How a Deal With Tesla Helped Save Chinese EV Startup NIO in 2019

How a Deal With Tesla Helped Save Chinese EV Startup NIO in 2019

Author: Manish Kharinta   

Tesla seems like its becoming one of the quirkiest car brands on the planet. The latest example is the recent announcement from Chief Executive Elon Musk that Tesla will accept Bitcoin as a form of payment. In addition to promoting the adoption of crypto-currency in the automotive industry, Tesla helped rival electric vehicle startup Nio in 2019, recalls the founder.

William Bin Li, the CEO and founder of Chinese EV startup Nio who is often referred to as China's Elon Musk, recently shared a story of how Tesla helped the young EV startup in 2019 during a time period that Li describes as one of the company's greatest challenges. At the time, NIO was plagued by financial issues that could have broken the company.

As we reported back in 2018, Tesla secured a site for its $2 billion Shanghai Gigafactory. Around that time, Nio had already paid for an expensive press line for its own factory, which it planned to install in 2019. 

Nio's financial troubles stemmed from multiple factors, which included insufficiency of funds and the fact that the startup could not attract enough investors.

This was also a time when trade tensions between the U.S. and China were growing, which was affecting NIO's stock price following its U.S. IPO in Sept 2018.

In addition to the growing trade tensions, NIO was forced to recall 4,803 ES8 SUVs in June 2019 because the batteries supplied by Chinese battery maker CATL posed a fire risk. The battery recall cost Nio roughly $49 million. 

The unexpected costs of the recall meant that Nio had to scrap its plans of building a second electric vehicle factory in Shanghai. 

Since Nio was not in the financial position to complete the second EV factory as planned, it offered to sell its press line equipment to Tesla for its own Shanghai factory, which was under construction at the time.

NIO initially was hesitant to sell its equipment to Tesla, as the company was its main competitor in the EV market in China. In an interview, Li referred to the transaction as "selling weapons to competitors."  

But by procuring the press line from Nio, Tesla saved around 12 to 18 months advance time that's required to place such an order, which allowed it to complete its factory sooner and expand its operations in China more aggressively. 

The deal also proved to be the saving grace for Nio, which was manufacturing vehicles out of the company's joint venture JAC-NIO manufacturing facility in Hefei, China. 

Nio eventually bounced back in 2020, selling a record number of electric vehicles. The company reported it delivered 5,291 vehicles during Nov 2020, its highest monthly sales ever. 

In total, Nio delivered 36,721 vehicles through Nov 30 of last year, representing an increase of 111.1% year-over-year. Cumulative deliveries in 2020 reached 68,634 vehicles. 

Nio released fourth quarter and full year 2020 results on March 1 and the company is off to a good start in the new year.

"The strong momentum has continued in 2021 as we achieved a historic monthly delivery of 7,225 vehicles in January and a resilient delivery of 5,578 vehicles in February, representing strong 352% and 689% year-over-year growth, respectively," said Li.

Nio said it's in the process of accelerating its production capacity this month to accommodate the growing demand for its electric vehicles.

Manish Kharinta
Manish Kharinta
Manish Kharinta is a automotive writer based in the Los Angeles area. He has worked for automotive industry websites TheSmokingClutch.com, CarDekho.com and CarBikeindia.com. His experience ranges from covering auto shows, to car reviews and breaking automotive news. Manish aims to bring forth his unique perspective on automotive design and technological innovations in the automotive industry.
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