File photo/Li Xing (NBD)

Sept. 25 (NBD) – Shares of Chinese electric vehicle (EV) start-up NIO Inc. (NYSE: NIO) plummeted by 20.22 percent on Tuesday after it reported loss-making unaudited financial results for the second quarter ended June 30, 2019 in the morning.

While the company generated the total revenues of 1.51 billion yuan (213.5 million U.S. dollars) in the quarter, which is higher than market estimate of 1.31 billion yuan, its net loss surged by 83.1 percent year-over-year to 3.29 billion yuan (465 mln U.S. dollars) during the period, compared to the estimate of 2.94 billion yuan.

A person close to NIO revealed the mounting deficit was due to the increase of cost led by the recall of ES8 in June.

The Shanghai-headquartered EV maker announced on June 27 a recall of 4,803 ES8 vehicles produced between April 2, 2018 and October 19, 2018 because of a risk of overheating and spontaneous combustion in battery packs of the vehicles, which is forecasted to cost NIO around 400-500 million yuan.

Besides, the company prioritized battery manufacturing capacity for recalled vehicles, which significantly affected production and deliveries, said NIO.

Renowned as one of the leading EV firms in China, NIO posted high delivery volume but significant loss in recent years.

In 2018, the company reported a considerable loss of 23.33 billion yuan. In the meantime, it delivered 11,379 units in total, becoming the first EV start-up that achieved the goal of 10,000 deliveries. From 2016 to the first half of this year, the combined loss of NIO reached approximately 40.35 billion yuan.

Facing serious financial condition, NIO is seeking to ease the strains in different ways.

William Bin Li, founder, chairman and CEO of NIO, mentioned in the earnings report that NIO have implemented comprehensive efficiency and cost control measures across the organization.

As part of NIO's strategy to cut cost, NIO plans to reduce global headcount to be around 7,800 by the end of the third quarter from over 9,900 this January, and aims to further pursue a leaner operation through additional restructuring and spinning off some non-core businesses by the end of this year, according to Li.

Moreover, NIO stated it has inked agreements with an affiliate of tech titan Tencent and Li, pursuant to which NIO will issue and sell convertible notes worth 200 million U.S. dollars to the two investors through a private placement. The deal is expected to be completed before the end of this month.

Email: gaohan@nbd.com.cn