New York-listed NIO’s recalling a third of its flagship EV after recent fire incidents

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Image: Reuters/Damir Sagolj
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Chinese electric-car manufacturer NIO, which went public in New York last year, is recalling around 4,800 units of its flagship electric SUV after the model caught fire or sputtered smoke in multiple incidents in recent months.

NIO announced the recall after one of its ES8 vehicles emitted smoke in Shanghai last month, following one that burst into flame earlier this month in Wuhan and another similar incident in Xi’an in April. NIO said that the Shanghai incident was a battery issue, and that it is recalling the vehicles in order to replace the batteries, a process which it said would take two months.

NIO is a leader of a slew of electric vehicle (EV) startups that have emerged in China in recent years, as the country strives to build an EV sector to rival the West. As of May, NIO has sold about 17,550 units of the flagship ES8 SUV. The recalled units account for nearly a third of those, adding pressure on the five-year-old company in a crucial transition period. China is preparing to slash electric-vehicle subsidies in half from this month, which could dent sales, and NIO’s stock price has dropped 80% from an all-time high in September on the New York Stock Exchange. The firm also recently accepted a bailout from a state-owned firm, which said it would invest 10 billion yuan ($1.45 billion) into a joint venture with NIO, and has delayed plans for an electric sedan.

These EV fires could also dent car sales in China even further at a time when the overall auto market is slowing, with even EV sales, once a bright spot, showing a marked slowdown last month.

The recalls also come as the industry has roundly questioned NIO’s cash-burn rate and its manufacturing model, as it doesn’t have its own factories and outsources production. The company makes its own battery packs, but sources the battery cells and modules from China’s CATL (Quartz membership exclusive), the world’s largest EV battery company. NIO produced the ES8 with state-owned carmaker JAC Motors.

The NIO fires came after two parked Tesla Model S cars caught fire in Shanghai and Hong Kong. Tesla rolled out a battery software update for Model S and Model X vehicles to revise charge and thermal management settings after the incidents.

The fires highlight a broader industry issue, as efforts to increase battery range for EVs involve increasing the energy density of their lithium-ion batteries—the amount of energy (Quartz membership) stored in the battery per kilogram. That can make a battery more prone to smoke or fire incidents. As yet, there is no consensus (pdf, p.22) in the industry on safe design standards as battery technology evolves, according to a 2017 report by the US National Highway Traffic Safety Administration.

Earlier this month, Audi recalled 540 units of its first battery SUV, the E-Tron, in the US because of a potential battery fire risk, although no fires have been seen so far.

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