People inspect one of Chinese electric vehicle start-up Nio's SUVs in Shanghai, China. Picture: REUTERS
People inspect one of Chinese electric vehicle start-up Nio's SUVs in Shanghai, China. Picture: REUTERS

Cash-strapped Chinese electric vehicle (EV) maker Nio says there is substantial doubt in its ability to continue as a going concern, sending its shares down 12% in premarket US trading.

The carmaker, seen as a challenger to Tesla, has been hurt by dwindling demand and reduced government subsidies for EVs in China, the world’s largest car market.

The coronavirus outbreak has worsened the company’s woes this year, disrupting production and delivery of its cars.

Its cash balance of $151.7m on December 31 is inadequate to provide the required working capital and liquidity for continuous operation in the next 12 months, the company said.

It signed framework agreements with Hefei’s city government in February to raise more than 10-billion yuan and set up new manufacturing facilities.

“The parties are working on the legally binding definitive documents to be signed,” Nio founder and CEO William Bin Li said.

The company also made several private placements of convertible notes in February and March for an aggregate principal amount of $435m to support its operations and business development.

Vehicle sales in China fell 18% in January while sales of battery-electric and other “new-energy vehicles” plunged 54.4%, preliminary data from the China Association of Automobile Manufacturers showed.

Reuters