U.S.-listed shares of Tesla rival Nio Inc tumbled more than 18% on Tuesday after the Chinese electric carmaker posted a drop in quarterly vehicle sales, blaming a cut in subsidies and weak demand.
China has been steadily rolling back subsidies provided to new energy vehicles, with plans to phase it out after 2020 amid criticism that some firms have become overly reliant on the funds.
Nio had said subsidies for its ES8 car were cut to 11,520 yuan ($1,600) beginning June 26 from 67,500 yuan ($9,500) last year.
"The China subsidy cut has been well understood by investors, so all China EV producers are looking at a weak 2H19," Roth Capital analyst Craig Irwin said.
The company, whose second-quarter losses nearly doubled, also canceled its post-earnings conference call scheduled for 8 a.m. ET.
The company reported an adjusted loss of $3.11 per share, bigger than analysts' expectations of a loss of $1.29 per share, according to Refinitiv data.
Nio, which counts Chinese internet giant Tencent Holdings and Hillhouse Capital Management as its shareholders, had raised $1 billion in September last year in an initial public offering, valuing the company at $6.4 billion. As of Monday's close, Nio was valued at $2.9 billion.
"In an environment of softer macro-economic and auto market conditions, we continue to work hard to expand our market penetration," Chief Executive Officer William Bin Li said in a statement.
Nio also plans to reduce its global headcount to 7,800 by the end of the third quarter from nearly 10,000 employees in January.
The company said its vehicle sales fell nearly 8% to 1.41 billion yuan ($198.40 million) from 1.54 billion yuan in the preceding quarter.
Nio sold 3,140 ES8 cars in the quarter, down from 3,989 cars in the first quarter. ES8 is a pure-electric, seven-seat sport-utility vehicle, which is seen as a rival to Tesla's Model X.
It sold just 413 cars of its cheaper ES6 model (shown above).
Apart from Tesla, Nio competes with a swathe of Chinese electric vehicle startups such as Byton and Xpeng Motors.
While Tesla does not disclose sales by country, consultancy firm LMC Automotive estimates sales of 23,678 Tesla vehicles in China in the first seven months this year, nearly double the number of cars it sold a year earlier.