Chinese multinational automobile manufacturer and Tesla’s strong rival Nio, has announced plans to slash its workforce by 10% as it moves to improve efficiency and reduce cost amidst fierce competition in the EV industry.
In an internal letter written to employees, Nio CEO William Li announced that the reduction exercise would be completed in November.
The decision was made based on its newly defined priorities to continue its long-term investment in core technologies, to ensure it has the sales and service capabilities to compete.
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Also, the restructuring seeks to ensure its products and brands are released as scheduled, consolidate duplicate departments, and remove inefficient positions, thereby improving efficiency and cutting project investment that doesn’t contribute to the company’s financial performance in the coming years.
The letter reads,
“I’m sorry to colleagues who may be impacted by the adjustments. This is a tough but necessary decision against the fierce competition. Our journey is a marathon on a muddy track. Please stay focused on efficient execution and improvement of system capabilities. We still have a gap between our overall performance and expectations”.
Despite the challenges, Nio’s restructuring plan is a crucial step toward financial recovery and long-term success in the competitive Chinese EV market.
The restructuring comes amid a price war started by U.S. automaker Tesla, at the beginning of the year which is dragging down the profitability of EV makers, which have stepped up efforts to prune costs and build partnerships to survive the consolidating competition.
Starting this year, Tesla slashed the prices of its models quite a few times in China and elsewhere, registering a record number of quarterly deliveries. The price cut by Tesla propelled local automakers in China to undercut prices to retain their market share.
Amid a deepening EV price war in China, in June 2023, NIO lowered prices across all its models, including its revamped ES8 and ES6 SUVs (sports utility vehicles).
Notably, NIO delivered 43,854 vehicles in the first five months of 2023, dwarfed by Tesla’s TSLA China sales, which were more than five times that of NIO.
The company is currently encountering growing difficulties attributed to widening financial losses and lackluster sales.
Additionally, Nio has also announced to end of its free battery-swapping services for new buyers. According to an article published by Reuters, it had been offering the swapping services for free at least four times each month to existing owners.
As Nio currently battles with difficult circumstances, investors will closely monitor whether these strategic changes have the potential to increase its sales and strengthen its position in the market.