(Yicai Global) June 12 -- Nio’s net losses widened more than two-and-a-half-fold in the first three months from a year ago on the higher cost of batteries and the end of government subsidies for new energy vehicles. But, determined to stay competitive, the Chinese electric car startup is cutting the price of all its cars by CNY30,000 (USD4,200).

Nio racked up losses of CNY4.7 billion (USD663.5 million) in the three months ended March 31 due to changes in its product portfolio, high spending on research and development and the increased cost of batteries, the Shanghai-based company said in its latest earnings report released June 9. The firm’s gross profit margin shrank to 1.5 percent, it added.

The end of state subsidies at the end of last year and an increased outlay to protect consumer rights have caused production costs to jump an average of CNY20,000 (USD2,800) per vehicle, Chief Executive Officer Li Bin said at the earnings call.

However, undeterred, Nio is reducing the price of all its cars by CNY30,000 (USD4,200), but free battery replacement will no longer be part of the package, it said today. People who already own Nio electric cars will continue to receive the original benefits, but they will need to relinquish these rights when buying a new Nio NEV in order to qualify for the discount.

Despite the drop in profit, Nio’s shipments surged 20.5 percent in the first quarter to 31,000 units. Revenue climbed 7.7 percent year on year to CNY10.6 billion (USD1.4 billion), but slumped 33.5 percent from the previous month.

Sales could sink by as much as 8.2 percent this quarter from a year earlier to 23,000 units, Li said. But sales should pick up in the third quarter after the launch of new models such as its new electric sports utility vehicle on May 24.

Nio will take action to control costs, it said. The firm has paused some investment and R&D projects. It will focus on the countries, such as Norway, Germany, the Netherlands and Belgium, where it already has a presence, while previously the carmaker had said recently that it plans to expand its footprint to 25 countries and regions, including the US, Australia and Japan, by 2025.

Nio is still investing heavily in R&D. In the first quarter, the firm’s spending on R&D soared 74.6 percent year on year to CNY3 billion (USD420 million), more than that of rivals Xpeng and Li Auto. And this year it expects to continue to invest between CNY3 billion and CNY3.5 billion in R&D each quarter, although this will be adjusted in due course, it said.

Of those carmakers to have released their first-quarter financial reports so far, Li Auto has reported a bigger jump in sales than Nio and has been making a profit each quarter. While Leapmotor and Xpeng have suffered from declining sales and revenue.

Editor: Kim Taylor