Woodcutter, Creator, Car, and the World of Vehicles Witness the Rise of China's Automotive Industry

The individual responsible for spreading rumors about NIO's bankruptcy has been caught. However, the impact of these rumors has just begun, as the seeds of doubt, once planted, will take root and grow.

For NIO, the biggest challenge lies in its sustained and significant losses.

More crucially, NIO has been slow to provide a timeline for when it expects to turn these losses into profits.

At NIO's current pace of losses, it will be difficult to uproot the seeds of doubt planted in the minds of the public and investors.

1. Half-year losses of 10.6 billion yuan.

According to public data, NIO's operating losses amounted to 5.394 billion yuan in the first quarter and 5.209 billion yuan in the second quarter, totaling 10.6 billion yuan in losses over the past six months.

Last year, NIO's operating losses even reached a staggering 22.655 billion yuan.

Looking at the second-quarter data, NIO's financial situation remains dire:

Vehicle Sales: Vehicle sales in the second quarter of 2024 amounted to 15.679 billion yuan, an impressive 87.1% increase from the first quarter.

Operating Profit: Operating losses in the second quarter of 2024 stood at 5.209 billion yuan, a slight narrowing of 3.4% compared to the first quarter. However, the absolute value of losses remains high.

Despite a substantial increase in vehicle sales revenue in the second quarter, NIO's losses remain significant. Achieving profitability and self-sustainability is NIO's primary challenge.

Put simply, survival remains the main theme of NIO's development strategy.

No matter how high-quality NIO's products are or how cutting-edge its technology, if it fails to achieve self-sustainability soon, it risks following in the footsteps of HiPhi Motors.

Interestingly, the Hong Kong Stock Exchange sets August 31st as the deadline for announcing half-year results. However, NIO has yet to release its half-year results, which may have contributed to the rumors of bankruptcy.

2. New Energy Vehicle Manufacturers Will Eventually Face a Tough Reality

It's important to note that NIO is just one of many new energy vehicle manufacturers suffering losses, and most of them are currently unable to achieve positive profits.

If new energy vehicles are evaluated as an independent entity, only a handful of manufacturers such as BYD, Tesla, and Thalys (not exhaustive) are able to sustain themselves through self-sufficiency. The rest are in a state of financial distress.

While some new energy vehicle manufacturers rely on traditional automakers for financial support, they remain unable to alter their loss-making reality.

Both new energy vehicle manufacturers, consumers, and stakeholders in the upstream and downstream industries anticipate a brutal supply-side reform in the industry.

In other words, a brutal shakeout in the new energy vehicle industry is imminent, and it may already be underway.

The ongoing price wars are a manifestation of the supply-side shakeout in the new energy vehicle industry.

Price wars put loss-making companies in a dilemma. If they join the price wars, they risk incurring even greater losses and potentially going bankrupt. If they maintain high prices, they risk losing market share and ultimately going out of business.

This is precisely why BYD's price wars have met with so much criticism.

Previously, Xia Yiping of JiYue teared up at a public meeting due to the company's dismal sales of only 300 vehicles in two months. However, business is a battlefield where tears are not an option.

The time for loss-making companies to hesitate and make decisions is running out.

3. Local Governments Will Also Be Involved

New energy vehicle manufacturers are closely connected to local governments. As they engage in fierce competition, local governments will also be drawn into the battle for a share in the new energy vehicle supply chain.

After all, the new energy vehicle supply chain is crucial for the ranking of local governments.

Currently, many new energy vehicle production capacities are being established across the country, including in the Yangtze River Delta, Pearl River Delta, Wuhan, Changsha, Chongqing, Xi'an, and even Beijing. With so many capacities and a saturated domestic market facing export barriers, the shakeout is expected to be particularly brutal.

Which regions will emerge victorious in this battle remains to be seen. Keep an eye out for further developments.