Nio electric vehicles sales took a hit as it scrambled to handle battery recall

Nio delivered just 837 electric vehicles in July, a nearly 38% drop from the previous month that was largely caused by a voluntary recall of its high-performance ES8 SUV.

The Chinese automotive startup issued a voluntary recall in June of nearly 5,000 ES8 SUVs after a series of battery fires in China and a subsequent investigation revealed a vulnerability in the design of the battery pack that could cause a short circuit. The recall affected a quarter of the ES8 vehicles sold since they went on sale in June 2018.

Nio was able to complete its recall for the 4,803 ES8s by prioritizing battery manufacturing capacity for this effort, which significantly affected production and delivery results, NIO founder, chairman and CEO William Li said Monday in a statement.

“On the positive side, we completed the ES8 battery recall in approximately half the time compared to our original timeline,” Li said, adding that the customer confidence is returning. “Looking ahead, with battery capacity allocation back to normal, we will accelerate deliveries and make up for the delivery loss impacted by the recall.”

Nio expects August to be a “much stronger month” with a target to deliver between 2,000 and 2,500 vehicles, according to Li. That’s a considerable jump from what Nio has been able to achieve in the past several months, even without the added battery recall problem.

Nio delivered 1,340 vehicles in June, 1,089 in May and 1,124 in April. As of July 31, 2019, aggregate deliveries of the company’s ES8 and ES6 reached 19,727 vehicles, of which 8,379 vehicles were delivered in 2019.

Deliveries of the ES8 initially surpassed expectations, but they have since slowed in 2019. Now, Nio will have to double deliveries in August to meet its target.

Other factors, and ones that might prove more chronic, also affected delivery numbers in July. Li noted that anticipated reductions in EV subsidies and macroeconomic conditions in China such as a decline in passenger vehicle sales and the U.S.-China trade conflict as other causes.

The souring economic picture in China has already prompted Nio to cut its workforce by 4.5%, shift its vehicle production plans and reduce R&D spending. Nio reported in May a loss of $390.9 million in the first quarter from a slowdown in sales that was primarily driven by the EV subsidy reduction in China and macroeconomic trends in the country that have been exacerbated by the U.S.-China trade war, Li said at the time.