(Yicai Global) March 6 -- Chinese new energy vehicle maker Nio has called a halt to a planned car factory in Shanghai.

The company signed framework agreements in 2017 with the government of the city's Jiading district and related entities to build an auto production plant there but has now agreed in principle with them to terminate this plan, William Li, Nio's chief executive and founder, told shareholders today, adding the firm will not reduce its prices. 

"The company has recently reached a consensus with relevant stakeholders to halt the plans for construction of this manufacturing base. Our strategy will instead focus on a full-vehicle production model. The firm believes our existing JAC Motors base in Hefei [in China's eastern Anhui province] is able to satisfy our capacity demand for the next two to three years," Li said in the conference call open to all shareholders.

"Price cuts are extremely damaging to consumer loyalty, so Nio will not lower its prices," he continued. The Chinese new energy vehicle maker apparently learned from the experience of its US rival Tesla, which roused fury among its Chinese buyers when it cut prices on some models by up to USD18,000 on Feb. 28.

Li never worried over problems with Nio's delivery and mass production capacity but was concerned that it would not be able to make sales, he said on popular Chinese TV show Dialog on Feb. 17, citing the ability to provide sound service and ensure steady car sales as the real difficulties.

Formed in 2014, the company became China's first electric carmaker to go public in the US when it listed in New York on Sept. 12, valuing the Shanghai-based startup at USD6 billion in a disappointing showing that raised about USD1 billion, or a little over half its target.

The timing was not ideal, according to analysts, who cite trade tensions, a deflating stock market and the lack of profitability at other electric car startups as negatives. 

Editor: Ben Armour