Shares of electric vehicle company, Nio Inc. (NYSE:NIO) are up by more than 2% in pre-market trading Friday morning after the Chinese automaker revealed in a letter to workers that they would be cutting 10% of staff positions.
According to the letter, signed by CEO William Li, “Duplicate” and “inefficient” roles will be cut, and project investment that are not expected to contribute to the company's financial performance within the next three years will also be deferred or cut.
“This is a tough but necessary decision against fierce competition,” Li wrote in the letter. “Our journey is a marathon on a muddy track.”
The Chinese automaker is currently battling for its existence following a period of fierce rivalry within the country's automotive sector in the last couple of years. Li wrote that to “qualify for the next round of competition,” NIO must reduce cost and properly allocate resources to crucial business segments.
The choice to reduce staff and consider closing divisions highlights the strain within China's EV market. This comes as major players like BYD Co (SZ:002594). and Tesla (NASDAQ:TSLA) Inc. continue to squeeze out smaller companies.
About a year ago, in response to a slowdown in sales, Tesla initiated a price war that intensified the competitive environment, leading other companies to follow suit and reduce prices to lure in customers.
Established in 2014, Nio has adopted a strategy that involves striking showrooms featuring exclusive lounge areas known as Nio Houses. These spaces cater to EV owners, offering complimentary beverages and social classes.
Moreover, Nio provides membership-like privileges, including free battery-swapping, charging services, and roadside assistance.
As financial strains increase, Nio has been reducing the availability of those services. Despite its efforts, the company has yet to achieve profitability, and in the last quarter, it faced a larger-than-anticipated loss of $800 million.
As a result, its market worth has plummeted from a peak of $99 billion in February 2021 to $13 billion.
Shares of NIO are up 2.82% in pre-market trading Friday morning.