Tesla's Chinese Rival Nio Snags $1.9B Investment From Parent, Strategic Investors As It Forays Into Mass Market

Chinese electric-vehicle startup Nio, Inc. NIO on Sunday announced that it has received cash infusion at a time the company has making a heavy push into the low-end of the market with its Onvo brand of vehicles.

What Happened: Shanghai-based Nio said strategic investors, including Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co., Ltd. and CS Capital Co., Ltd., have agreed to invest an aggregate of 3.3 billion yuan ($470.64 million) in cash in its subsidiary Nio China. The investment is in lieu of an equity stake in the company.

Concurrently, Nio has agreed to invest 10 billion yuan (about $1.43 billion) in cash to subscribe to the newly issued shares of Nio China. Following the completion of the transaction, Nio will hold 88.3% of controlling interest in Nio China. The strategic investors along with existing shareholders will collectively hold the remaining 11.7% equity interest in Nio China.

Nio also has rights to invest an additional 20 billion yuan investment to subscribe to additional shares in Nio China by Dec. 31, 2025, based on the same price and terms of investment transaction.

The completion of the investment is subject to regulatory and internal approvals as well as the satisfaction of customary closing conditions.

The strategic investors and Nio will inject cash into Nio China in two instalments, with 70% to be made by Nov. 2024 and 30% by Dec. 2024.

“This investment not only demonstrates the strategic investors' firm support for the high-quality development of the electric vehicle industry but also underscores their strong recognition of NIO's unique values and industry leadership. With an enhanced balance sheet,” the company said in a statement.

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Why It’s Important: Nio was so far focused on the premium electric-vehicle segment and has carved a niche for itself in the Chinese new-energy vehicle market. The domestic market has become increasingly tough amid intensifying competition and weakening demand. The company has so far weathered the inclement conditions and has recently marked its foray into the low-end of the market with the Onvo brand.

In a post on X announcing the strategic investment, the company said its business is picking up momentum and its delivery has surpassed 20,000 units for a fourth straight month. Delving into the first model launched under the Onvo brand, Nio said L60, a smart electric mid-size family SUV, was delivered on Sept. 28, with order intake stronger than anticipated.

The demand side of the equation could also benefit from the stimulus measures China announced recently. The People’s Bank of China announced last week it will in the near future cut the reserve requirement ratio, which is the amount of cash banks must hold as reserves, by 50 basis points freeing up about 1 trillion yuan ($142 billion) for new lending, Reuters reported. It also hinted at the possibility of reducing it by an incremental 0.25-0.50% points. The PBoC also said it would lower seven-day repo rate by 0.2 points, interest rate on medium-term lending facility by about 30 basis points and loan prime rates by 20-25 basis points.

Incidentally, in December Nio closed a $2.2 billion equity investment from CYVN Investments RSC Ltd, an investment vehicle based in Abu Dhabi. Following the transaction, the company said CYVN in aggregate beneficially owns approximately 20.1% of the company's total issued and outstanding shares.

Nio’s NYSE-listed ADRs ended Friday’s session 12.80% higher at $6.52, according to Benzinga Pro data.

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