One of Beijing’s best-known electric carmakers is selling its signature product as it struggles to make money.
Years before Chinese electric car startup NIO went public on the New York Stock Exchange, it was best known for winning the Formula E electric racing series. However, it recently sold its Formula E team to Shanghai-based car-racing company Lisheng, news outlet E-racing.365 reported on Monday (July 29). The Formula E team will likely remain named NIO in the next season, the publication said, but QEV Technologies, a Spanish company, will take over operational and technical management.
In a statement to Quartz, NIO said “the team has new strategic investors who are beneficial to [its] long-term development.” It declined to elaborate on what prompted it to sell the unit and how much it made from the deal.
It’s a surprising move given that NIO’s brand image is strongly associated with Formula E. In 2015, NIO (then known as Nextev) won the FIA Formula E championship in its inaugural season. NIO saw its success in electric racing as crucial for the development of its passenger car business. “We define the technology for our race cars, which feeds back into our NIO vehicles. This makes NIO one of the most advanced electric car companies existing, with a proven performance pedigree that delivers,” reads the introduction to the car-racing team on NIO’s website.
The sale is further clouding NIO’s future, as the five-year-old Shanghai-based carmaker undergoes a transition period due to China’s recent reduction in electric-vehicle subsidies by half. That’s put further pressure on the company, which is yet to make a profit since it delivered its flagship premium sports utility vehicle (SUV) in June last year. It reported a net loss of $390 million in the first quarter of 2019, a 70% increase from a year ago. The company got a big bailout in June from a state-owned firm, which said it would invest 10 billion yuan ($1.45 billion) into a joint venture with NIO.
Furthermore, three of NIO’s ES8 SUVs caught fire or emitted smoke in recent months, forcing it last month to recall 4,800 units, or 26% of its ES8 sales. It also started delivering the ES6, a compact SUV, in the same month, but has so far only sold 413 units while sales of the ES8 also slows.
In May, the company closed its San Francisco office, shedding about 70 employees (pdf, p13). Globally, it’s laying off 4.5% of its some 9,500 staffers this year. In March, it also abandoned a plan to build its own factory amid questions of quality control because NIO has been, and will keep, outsourcing its car manufacturing to state-owned carmaker JAC Motors at least until 2021.