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Chinese electric scooter company Niu shakes off pandemic slump and predicts strong sales ahead - CNBC

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This Niu scooter store in Beijing's Chaoyang district is open daily from about 8 a.m. to 8 p.m.
Evelyn Cheng | CNBC

BEIJING — Almost three years since Chinese electric scooter start-up Niu Technologies listed in the U.S., the company has not only turned profitable but has also shaken off losses from the coronavirus pandemic.

Niu said Monday that second-quarter revenue in China and abroad rose by 46.5% from a year ago to 944.7 million yuan ($146 million), and forecast growth would retain roughly the same pace — or better — in the third quarter.

"We're seeing the China market really [starting to] pick up in terms of electric scooter consumption," CEO Yan Li told CNBC's Martin Soong on "Squawk Box Asia" on Tuesday. "And then about halfway into the quarter we see our sales have been [picking] up significantly."

The company is also pressing on with a rapid expansion plan. Niu expects to open more than 300 stores in China in the third quarter, after adding 450 stores in the second.

Profits on the rise

Niu said Monday that with growth of 53.4% in adjusted net income in the second quarter, the company has made 110.6 million yuan ($17.1 million) in the first half of this year.

That's up from 49.1 million yuan in the same period last year — during the height of the pandemic in China — and more than the 68.7 million yuan reported for the period in 2019.

The company had reported an adjusted net loss of 46.4 million yuan in the first half of 2018.

Niu shares closed 4.6% higher overnight after the earnings release. The stock is down about 20% year-to-date. But it has gained 147% since going public on the Nasdaq in October 2018 and has a market capitalization of $1.7 billion.

International shipping challenges

Overseas, Niu said it sold 34.8% more scooters in the second quarter than the same period a year ago.

But the 6,980 units sold abroad was still a fraction of the 246,018 scooters that Niu said it sold in China, a market where sales also grew far faster, at 58.8% year-on-year.

Due to Covid disruptions in global shipping channels, Niu had a backlog of almost 4,000 units it couldn't ship out in the second quarter, Li said in a call with analysts Monday. That's according to a StreetAccount transcript.

He noted that importers in Europe and the U.S. are waiting for a decline in shipping costs, which have surged from about $150 per scooter to $450 each.

Wide-ranging growth outlook

Partly due to this overseas uncertainty, Niu gave a wide range for its third-quarter forecast, predicting revenue would grow year-on-year by anywhere between 40% to 62%. That's the equivalent of 1.25 billion yuan to 1.45 billion yuan, a difference equal to about $30.9 million.

In the second quarter, the company reported a slight decrease in gross margin that it attributed to higher raw material costs.

Management added on Monday's call that future growth in China this year would vary by region since local governments are taking different approaches to enforcing regulation on electric scooter use. The standards could drive growth from users having to replace their existing scooter models.

The call did not discuss China's recent regulatory crackdown that has focused on technology giants' monopolistic practices, data protection policies and stock listings in overseas markets.

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