Image: NIO

NIO, a young Chinese electric car company, is deciding not to build its planned Shanghai factory after a particularly expensive 2018. It will keep building and developing cars, though.

NIO (the Chinese name translates to “Blue Sky Coming”) bills itself as a premium automaker that touts high-performance and swanky owners’ clubhouses. It dropped a press release Tuesday featuring stats on the company’s financial situation–2018 saw revenue of $720.1 million and a net loss of about 1.4 billion (more specifically, $1,401.9 million) according to the document.

As for the new factory, here’s the Mar. 5 update exactly as the company put it:

“In 2017, NIO signed framework agreements and memorandums with the government and related entities in Jia Ding, Shanghai, to build a manufacturing plant for NIO. Recently, the Company has agreed in principle with these contractual counterparties to terminate the plan for this manufacturing plant, pending signing of definitive termination agreement.”

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Chinese state-owned JAC Motors, currently contracted to build the NIO ES8, will apparently continue to do so. Fortunately for NIO, this option exists, so the company can get off the ground selling cars without having to build its own factory.

NIO reports that 12,775 ES8s were built by JAC and 11,348 were delivered in 2018, beating the company’s targets.

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But of course this arrangement means that NIO has to pay JAC for every car it makes. And “NIO had already paid JAC Motors about $14.5 million when the EV startup went public in September, well before production ramped up,” according to The Verge, which also neatly laid out three big problems contributing to the sales slow down NIO is currently wrestling with:

  1. A rush to make a lot of deliveries in 2018, to get ahead of China’s dwindling electric vehicle subsidies.
  2. “January and February are typically slow months for car sales.”
  3. The fact that car sales in China have dropped for the first time in decades.

So it seems like NIO did pretty well as far as making sure it actually built cars, but the price to do that was high. I’m a little confused by the fact that the company is claiming it beat vehicle production targets, yet is also deciding not to build a factory. I’m going to go ahead and guess that there are more moving parts to the situation than what NIO is parsing out in its press release, but at the moment the back story remains unclear.

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Same goes for what this means for the company’s long-term situation, as far as I’m concerned. In the short-term, NIO seems determined to keep growing its production one way or another.