NIO, known as the "Chinese Tesla", has lost $5 billion in four years. Is it running out of funds?

Tesla has lost $5 billion in 15 years. In contrast, NIO, known as the "Chinese Tesla," only took four years. NIO's losses continue as the company releases its second-quarter earnings report on Tuesday. According to the average forecast of two analysts, NIO will lose another 2.6 billion yuan (about $369 million) in the second quarter, about $4 million a day, bringing the company's cumulative losses since its creation in 2014 to about $5.7 billion.

Tesla has accumulated losses of $5 billion in 15 years. In contrast, NIO, known as the "Chinese Tesla", only took 4 years.

The losses continue for NIO, which is set to report second-quarter earnings on Tuesday. The average estimate of two analysts predicts that NIO will lose another 2.6 billion yuan ($369 million) in the second quarter, or about $4 million a day, bringing the company's cumulative losses since its founding in 2014 to about $5.7 billion. NIO was founded by Li Bin and has received investment from Tencent Holdings.

About a year ago, NIO's market value hit a record $11.9 billion. However, cost overruns, weak sales and recalls have caused NIO's market value to plummet 74% since then. "There will be a big reshuffle of these electric vehicle startups in the next two years," said analyst Siyi Mi. "Before, venture capital came to them, but that's not the case anymore."

Total electric vehicle sales in China, which accounts for half of global electric vehicle sales, fell in July for the first time since the government cut subsidies, and deliveries fell again in August.

Financing pressure
is increasing for NIO. NIO said it will lay off 14% of its employees to 7,500 by the end of this month. Battery fires, smoke and other accidents have forced NIO to recall about 4,800 vehicles, accounting for more than 20% of total vehicle sales. NIO's second-quarter vehicle deliveries fell from the first quarter.

After the Shanghai Municipal Government chose to provide financial support to Tesla, NIO also abandoned its plan to build a manufacturing plant in Shanghai and instead outsourced the production of ES6 and ES8 to JAC Motors.

Bill Russo, founder and CEO of Shanghai-based Automobility Consulting, believes that even though Tencent and Li Bin each invested $100 million in NIO this month, the capital-intensive nature of the automotive industry means that "the money won't last long."

Earlier this month, NIO announced that it had reached a convertible bond subscription agreement with Li Bin and a subsidiary of Tencent Holdings. According to the agreement, NIO will issue and sell convertible bonds with a total principal amount of US$200 million to Tencent and Li Bin through private placement.

Li Bin has downplayed the challenges facing NIO. In an interview in June, he said NIO's share price drop was "no big deal" and that investors needed to understand that building new cars costs money.

But NIO is running low on funds and is now counting on a 10 billion yuan investment from an investment company backed by the Beijing municipal government. In May, NIO signed a framework agreement with Beijing Yizhuang International Investment Development Co., Ltd. According to the agreement, NIO will set up a new entity, NIO China, in Beijing Economic and Technological Development Zone and inject specific businesses and assets into NIO China. Yizhuang Guotou will invest 10 billion yuan in cash in NIO China through its designated investment company or in conjunction with other investors to obtain a non-controlling shareholder interest in NIO China.

Another challenge facing NIO is Tesla, which is set to start making cars in China later this year, thereby lowering the price of its cars sold in China. "
NIO's positioning is not accurate," said Yale Zhang, founder and CEO of Shanghai Autoforesight, a consulting firm. "In the long run, I am not optimistic about its future."