Demand for EVs has weakened in China as consumers favour more economical plug-in hybrids, sales of which rose 84.5% in the first nine months of the year, helping carmakers such as Li Auto (2015.HK) and BYD to gain market share.
Nio has told staff the reduction exercise would be completed in November, it said in a statement to Reuters.
"We still have a gap between our overall performance and expectations," it told staff in an email, adding that it needed to improve efficiency and ensure adequate resources.
"This is a tough but necessary decision against the fierce competition."
A price war started by U.S. auto maker Tesla at the beginning of the year is dragging down profitability of pure EV makers, which have stepped up efforts to prune costs and build partnerships to survive the consolidating competition.
Nio, which rebounded from a sales slump in the first half, delivered 109,993 EVs in the first nine months this year, up 33.4% on the year-earlier period to outpace growth of 18.1% in China's EV sector overall.
Apart from the layoffs, Nio said it would defer or cut long-term project investments that would not contribute to financial performance within three years.
Nio, which sells cars in China and Europe through its self-owned stores, is also considering building a dealer network in Europe to speed sales growth, Reuters reported last month, to ease cash pressure on the loss-making company.
