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Nio's ET7 is unveiled at the Shanghai auto show on April 16, 2019.

ALY SONG/Reuters

Shares of Tesla-rival Nio Inc. soared more than 53 per cent on Monday after the electrical carmaker reported a smaller-than-expected loss, benefiting from selling more of its lower-priced vehicles even as the industry faced weak demand.

The loss-making electric carmaker said its sales improved in September and that it delivered 4,799 vehicles in the quarter ended Sept. 30 compared with 3,553 deliveries in the second quarter.

This comes at a time when electric carmakers are battling an uncertain demand in China, the world’s largest auto market, as it rolls back subsidies on new energy vehicles amid criticism that some companies have become overly reliant on the funds.

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China’s Nio had said subsidies for its pricier ES8 model, a seven-seater sport-utility electric vehicle that is widely seen as a rival to Tesla Inc.’s Model X, were slashed by nearly 83 per cent starting June.

Adding to its woes, Nio on Monday warned it did not have adequate cash for “continuous operation in the next 12 months” and was looking to obtain external financing.

The company, which counts Chinese internet giant Tencent Holdings Ltd. and Hillhouse Capital Management as its shareholders, raised US$1-billion last year in an initial public offering that valued it at US$6.4-billion.

In May, Nio signed a pact with a government-backed fund for an investment of about US$1.5-billion.

The company said on Monday its balance of cash and cash equivalents, restricted cash and short-term investment was 1.96 billion yuan (US$280.5-million) as of Sept. 30, 2019.

Larger rival Tesla said on Monday it has started delivering Model 3 electric cars from its strategic factory in Shanghai that begun operations less than a year ago, and that it plans to ramp up deliveries in January.

Nio chief executive William Bin Li, however, sees little threat from that. “If you compare the Model 3 with our products, we believe our product is still very competitive,” he said.

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The company expects to deliver more than 8,000 units in the fourth quarter.

Excluding items, Nio posted a smaller-than-expected loss of 2.38 yuan a share in the third quarter compared with the average analyst estimate of a loss of 2.43 yuan. Last year, net loss stood at 10.35 yuan a share.

Total revenue rose nearly 25 per cent to 1.84 billion yuan, beating analysts’ estimates of 1.63 billion yuan, according to Refinitiv.

Nio shares closed up more than 53 per cent at US$3.72 in New York on Monday, erasing its year-to-date losses of nearly 45 per cent.

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