Recent news are circulating that due to the effect of corona virus, NIO Automobile was suffering from delays in paying its employees.  Already short of funds, it was also reported that the company announced that employee salaries for January will be deferred to February 14 while the 13th month salary of last year, 2019, will be paid simultaneously with the salary for February 2020 on the 6th of March.   Furthermore, the salary payment for the February and March will also be delayed.

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According to NIO, the changes in the rhythm of business management was brought about by the epidemic situation which has pushed the resumption of work to February 10.  Under normal circumstances, the company has its payday on the 8th of the next month.  The abovementioned 13th month pay will be made available in two options: normal salary or stock, with employees able to apply for either full or partial replacement of this 13th month pay with stocks.   A coefficient premium of 1.1 will be given.

The outbreak of the novel corona virus has affected the stock prices of many domestic listed car companies as well as brought significant impact on the production and operation of different car companies.  For a company already facing funding problems, the recent epidemic has further weakened NIO Automobile’s operation. 

The company’s sales have steadily increased after August 2019 with single-month sales reaching 3170 units in December.  Momentum shifted in January 2020 with the effect of off-season sales, decreasing by 11.5% leading to a decline in operating income.   NIO Automobile’s cash flow has been under considerable pressure since last year.  As of the end of September of last year, the company held cash, cash equivalents, restricted-use cash and short-term investments totaling only 1.907 billion yuan.

February 6, NIO Automobile was reported to have completed a US$100 million in convertible bond financing.  Another US$100 million of convertible bonds was received a week later, on February 14.   In addition, the company has received US$ 200 million since January of this year.

As of late, the short-term effect of the NCOV epidemic on the local economy is already greater than the one caused by SARS in 2003.  This is based on the CAAM(China Association of Automobile Manufacturers)’s investigation involving over 300 complete vehicle and component companies.   Delays in work resumption will carry with it a risk for capital chain disruptions due to suspended production and business operations, inducing further effects on rent, wages, and other expenses.

As can be gleaned from the recent news reports, the new epidemic has further weakened NIO.   The company aims to target an increase in sales and the obtaining of new financing after February to stay afloat.