China’s NIO is arguably the furthest along of all the flashy electric car startups that have formed over the last few years. Now it wants to go public in the United States on the New York Stock Exchange, according to a filing with the SEC this past week. But a close inspection of that document shows the company faces potential roadblocks in both demand for and production of its first car, and it also exposes that the company discovered a crucial financial problem in the months leading up to the IPO.

NIO has come a long way for having such a short history. Founded in 2014, it quickly (in automotive industry timescale) designed and produced a small batch of an all-electric supercar called the EP9, which has already broken a few EV and non-EV production car records. The EP9 also autonomously lapped the track at Circuit of the Americas in Texas in late 2016, which helped establish the company’s ambitions to develop self-driving technology.

The company’s first production car, a seven-passenger SUV called the ES8, debuted in December 2017 and went into production in China earlier this spring. It costs about half the price that a Tesla Model X commands in the country, and NIO started shipping them to customers there in June. A smaller five-passenger SUV called the ES6 is already in development, with deliveries starting in 2019. In the push to get these cars out the door, NIO’s global ranks have swelled to over 6,000 employees.

reportedly interested in buying some of the public shares. It will need that backing, as the company also has big ideas about changing the car owning experience, from “NIO houses” (which mix service centers with cafe vibes), to battery-swapping technology, to a cute AI-powered assistant on the dashboard.

“Tesla is a company founded in the era of the internet, while NIO was born in the era of mobile internet,” founder Bin Li said in December. “The new era, in which smartphones and apps play a much bigger role in people’s daily lives, gives companies like us a great opportunity to revolutionize the automobile industry.”

The goals of putting a car into production and launching a public offering in the US are shared by a number of NIO’s most notable peers, but the company is about to become the first electric car startup to follow Tesla in doing both. Faraday Future, Lucid Motors, SF Motors, Byton, Rivian; all of these fellow startups are still not in production, and many of them are still clamoring for funding.

But the F-1 form that NIO filed with the SEC this week shows that it still has plenty of challenges ahead.

Production hurdles

NIO has shipped just 481 ES8s since the first one left the factory on June 28th, and so its first car has only brought $7 million in total revenue to the company to date.

A slow start might be helpful, according to Doug Betts, who leads JD Power’s global automotive division. “I think if they’re smart they’ll be very careful about trying to have a massive launch and deliver lots of vehicles because the worst thing that could happen to them is quality problems with the early deliveries,” he says. “They need those people to be really excited about what they got to start to build some momentum.”

But even if that’s true, demand for the ES8 isn’t exactly off the charts. NIO says it has only racked up about 17,000 reservations since the SUV’s debut in December, a paltry number in light of the fact that China is the biggest EV market in the world right now, with sales touching 1 million per year. Reservations for the ES8 require a refundable deposit of 5,000 yuan, or about $730, according to the F-1, and 4,989 of those customers have placed non-refundable deposits of 45,0000 yuan, or about $6,500.

If early customers are wowed by the ES8 and the SUV becomes a hit, that could actually complicate things, according to NIO’s own filing. While the company’s goal is to eventually be able to make customer’s vehicles to order within three to four weeks, NIO says in the F-1 that, if all 17,000 existing reservations were to convert to orders today, it would take the company “six to nine months” to fulfill them.

there are already close to 500 with no signs of stopping. But Zhao cautions that a multinational approach can stretch a company thin. “Yes, you are more global, you’re able to tap into all these resources, technologies, and contacts. But you also increase the coordination costs. To what extent you can get things done quickly and effectively with such a spread out network is not clear,” she says.

NIO, Zhao says, may feel pressured to stand out from from the glut of startups in China. At the same time, NIO might also want to capture what’s left of the investment momentum that has vaulted so many startups to (and beyond) the $1 billion mark in the US.

“So many companies are trying to ride the wave,” she says. “Which ones remain after the wave recedes, we don’t know.”


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