China-based electric carmaker Nio (NYSE: NIO) reported a decline in vehicle deliveries for July, after the relatively strong performance in June that marked a recovery from the softness seen in the previous month. The company’s stock lost about 5% in early trading Monday.

Nio, which manufactures premium passenger cars that run on electricity, delivered 837 units last month. That included 673 ES6s, the company’s 5-seater premium SUV, and 164 ES8s, its 6/7-seater premium SUV. The July results represent a 38% sequential decline.

Nio July vehicle deliveries decline 38%

According to the management, overall performance was negatively impacted by the recent battery recall for the ES8 model. This prompted the company to focus more on stepping up its battery production capacity, which in turn affected vehicle production and deliveries. Also, June sales had received a boost from the advancement of a part of deliveries in view of the reduction in subsidies for electric vehicles, implemented by the Chinese government.

Also see: Tesla stock plunges after Q2 results miss

As many as 8,379 units, including both the leading models, were delivered so far this year, taking aggregate deliveries to 19,727 units. Shipments of ES8 first started in June 2018 and those of ES6 began approximately a year later.

Nio's total vehicle deliveries rise to 19.727

The other factors that affected sales last month are the escalation of the trade dispute between Beijing and Washington and the general slump in the Chinese economy. The country’s automobile market, one of the largest in the world, has been witnessing a steady decline in sales for more than a year, reflecting the challenging market conditions.

Related: Nio deliveries rise in June

“On the positive side, we completed the ES8 battery recall in approximately half the time compared to our original timeline. Having taken swift and transparent actions throughout the recall process, we are happy to report that we see users’ confidence in the safety and quality of our vehicles quickly returning,” said William Li, chief executive officer of Nio.

Last month, Nio’s American counterpart Tesla (TSLA) reported a narrower net loss for the second quarter, helped by an increase in revenues. However, the results missed analysts’ forecast. Revenues surged 60% to $6.3 billion aided by strong vehicle deliveries.

Looking ahead, Nio expects to deliver between 2,000 and 2,500 vehicles in August, even as battery capacity allocation returns to normal.

Related: What Tesla executives discussed during Q2 earnings call

Nio shares have lost steadily since their debut on the New York Stock Exchange last year and are currently trading well below the IPO price. The stock closed the last trading lower and lost further early Monday.

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