NIO is one of the largest car manufacturers in the Chinese market. The company was founded in 2014 and has increased since then, receiving public and private investments. However, experts predict a slowdown in growth, which could lead to severe problems and potential legal and ethical issues. These challenges will undoubtedly affect the well-being of the company’s 6,000 employees and its CEO and management. This paper aims to present legal and ethical issues NIO is facing, describe its managerial structure, and give a short biography of its principal manager.
Potential Legal and Ethical Issues
Despite the company’s stable growth and steady development in previous years, NIO will soon face difficulties. In particular, according to experts, by the end of the third quarter of 2019, the company’s shares fell by 77% (Markoch, 2019). It is believed that this may lead to the company’s bankruptcy since its business largely depends on investors (Markoch, 2019). NIO is a joint venture with Beijing-based international investment and development company E-Town Capital and may have hoped for government support. Still, so far, nothing indicates that these hopes will come true.
China has been known to stimulate sales of electric vehicles through subsidies that could be up to $ 7,500 per vehicle. However, the governmental decision to adjust the support led to the disappearance of many less competitive start-ups and created severe threats to NIO. These threats stem from the fact that the company faces problems obtaining the investments necessary to sustain the business. Besides, lowered production and demand will increase operating costs.
According to experts, as of June 30, 2019, the company had only $ 503.4 million in cash (Markoch, 2019). NIO had hoped to receive $ 200 million in cash from Tencent, but the deal did not happen. Besides, the Wuxing District government refused to invest the promised $ 707 million, citing severe risks. No less important was the contraction of the domestic market due to tough competition. The Chinese government intends to increase electric vehicles’ share from 4% to 20% by 2025 (Markoch, 2019). But this is not enough to meet the demand for all existing manufacturers since factories must produce tens of thousands of vehicles per year to maintain low operating costs.
If NIO fails to attract investors, the company may face ethical and legal challenges, given that NIO has already entered the exchange market. In September 2018, NIO issued 160 million shares for $ 6.26 per share, and at that time, the company was valued at $ 6.4 billion (Zhang & Zhang, 2020). Since its inception, the company has received investments totaling about $ 1.5 billion (Zhang & Zhang, 2020). Therefore, the company’s bankruptcy can lead to severe problems for investors and leave more than 6,000 employees without a job.
NIO’s Ethics and Business Conduct
According to NIO Inc. Code of Business Conduct and Ethics, the company adheres to employees’ rules and regulations. In particular, according to the document, the company’s activities are consistent with the laws of the country, regions, and cities in which the company operates (NIO Inc. Code of Business Conduct and Ethics, 2018). These include laws governing bribery and kickbacks, patents, copyrights, trademarks and trade secrets, information confidentiality, insider trading, offering or receiving rewards, and harassment in hiring.
The company is also subject to laws on environmental protection, health, safety, false or misleading financial information, misuse of corporate assets, and currency exchange. Therefore, if the company’s IPO predictions do not come true, NIO can be accused of providing false or misleading information. In addition to complying with laws, NIO guarantees that there is no discrimination in employment and the process of work. The code also states that company employees must treat customers, suppliers, competitors, and employees fairly. Finally, NIO promises to create a safe and healthy working environment for its employees.
The company’s board of directors is represented by Bin Li – Founder, Chairman and CEO; Lihong Qin – Co-Founder, Director, and President; Hai Wu – Independent Director, Denny Ting Bang Li – Independent Director, and James Gordon Mitchell – Director (Board of directors, n.d.). Management is presented by Bing Li, Lihong Qin, Shen Feng – Executive Vice President and Chairman of the Quality Management Committee, Xin Zhou – Executive Vice President and Chairman of the Product Committee, Wei Feng – Chief Financial Officer, and Ganesh W. Yer – Managing Director of NIO USA and Global CIO. The company also emphasizes that the corporate governance policy of NIO Inc. aims to protect the interests of shareholders and encourage responsible business practices.
William Li or Li Bin is a Chinese entrepreneur, founder, and CEO of NIO, an electric vehicle manufacturer. The company has offices in China, Hong Kong, the USA, Germany, and London. Noteworthy, Forbes estimated Li’s personal worth at $ 1.4 billion in February 2019 (#1717 William Li, 2020). Before founding NIO, Li co-founded numerous companies and has invested in the development of more than 40 companies in the Internet and automotive industries. On August 9, 1974, William Li was born on a dairy farm in Anhui to a low-income family. Upon his school admission, the family began saving money for William’s education, who then entered Peking University and received a BA in Sociology and Law.
The first large company that Li founded was Bitauto Holdings Ltd. Since 2000, Li served as CEO and Chairman of the company until he sold it in 2013. Li gained worldwide fame after founding NIO in November 2014, as the company produced luxury cars for the vast Chinese market, which had significant potential. Many well-known enterprises have invested in the company, including Tencent, Temasek, Baidu, Lenovo, and TPG, so by 2016, NIO had more than $ 1 billion in investments. The first car produced by the company was the NIO EP9, which took 1.5 years to develop. In 2017, 10,000 cars were produced, and in 2018 – another 14,000; in 2019, the company intended to manufacture 20,000 more. Besides, in 2017 the company received an order for its first electric off-road vehicle (#1717 William Li, 2020). After listing on the New York Stock Exchange, NIO has become a recognized leader in the Chinese market’s electric vehicles industry.
Today, Forbes estimates Lee’s personal worth at $ 3.4 billion. Forbes also ranked him 1,717 on the 2019 billionaire list, but the entrepreneur dropped off in 2020. Lee was also number 249 in China Rich List 2018 but dropped off in 2019 (#1717 William Li, 2020). Currently, William Li resides in Beijing and holds Chinese citizenship. Interestingly, William Li has been referred to as China’s Elon Musk since he founded Bitauto Holdings Ltd, a web content provider for the automotive industry.
Thus, legal and ethical issues NIO is facing were discussed, and its managerial structure was described. Besides, the paper presented a short biography of NIO principle manager William Li. Despite the predicted success, the company faced funding difficulties in 2019 following a policy of adjusting government subsidies for electric vehicles. Due to fierce competition and a shrinking market, the company will have to go through hard times. If it is declared bankrupt, NIO will have to face legal and ethical issues related to its liability to investors and employees.
#1717 William Li (2020). Web.
Board of directors. (n.d.). Web.
Markoch, C. (2019). NIO stock has a math problem. Investor Place. Web.
NIO Inc. Code of Business Conduct and Ethics (2018). Web.
Zhang, G., & Zhang, M. (2020). Innovations in new energy vehicles take NIO as an example. In 2020 International Conference on Social and Human Sciences (ICSHS2020) (pp. 554-561). Shanghai, China: School of Economics, Shanghai University.