Tesla’s rival and chinese electric vehicle maker NIO has decided to lay off just over 20 percent of its workforce. Further, by the end of the third quarter, it will look to reduce its global workforce to around 7,800 from over 9,900 in January. Previously, the company has cut its US workforce twice. 

NIO’S financial crisis began when auto sales in China, the world’s largest passenger-vehicle market, fell over 12 percent during the first half of this year, after the country’s first annual auto-sales decline since 1990. China’s government decision to cut subsidies for electric vehicles also affected the sales. 

The current situation is that NIO’s stock price has fallen by over 60 percent since it began listing its shares on US exchanges in September 2018 and in the second quarter it reported a net loss of $478.6 Mn on revenue of $219.7 Mn. 

China has been steadily rolling back subsidies given to new energy vehicles, and seems to have plans to phase it out after 2020 amid criticism that some firms have become overly reliant on the funds. This decision might impact NIO’s business and create more burden on them. However, amidst the economic uncertainty and reduced sales, Chief Executive Officer William Bin Li remains positive. 

"In an environment of softer macro-economic and auto market conditions, we continue to work hard to expand our market penetration," said William. 

NIO had raised $1 Bn from Tencent Holdings and Hillhouse Capital Management in September last year in an initial public offering, valuing the company at $6.4 Bn. As of Monday's close, Nio was valued at $2.9 Bn.

Generous subsidies and tight regulation have earlier helped China maintain its leadership position in electric vehicle sales. But now how its plan to phase out these subsidies will impact the sector’s growth in the country is to look forward to. As electric mobility across the globe expands, electric vehicle makers like NIO have many opportunities to grow. But while they focus on innovating and catering to the new emerging demand, they should also be mindful of how the current global economic slowdown and be aware about the other trends that might affect their business and growth. 

Image source: Underdesign.com