Why Nio Is Investing In Chinese Online Used Car Dealer Uxin

Chinese EV manufacturer NIO Inc - ADR NIO, which has a strong competitive positioning in the Chinese EV market, is investing in a used car retailer.

What Happened: Beijing-based Uxin Ltd UXIN, which operates as a nationwide online used car dealer in China, said Nio Capital, the venture capital arm of Nio, and Joy Capital have agreed to invest up to $315 million in the company.

Concurrently, Uxin said it has agreed with its convertible note-holders, including 58.com, TPG and Warburg Pincus, to convert their convertible notes in an aggregate principal amount of $69 million into Class A ordinary shares of the company.

More than 10 important investors, including NIO Capital, Joy Capital and the convertible notes holders, have agreed not to sell their shares in the next nine months.

The transaction is subject to customary closing conditions stipulated in the agreements.

Related Link: Tesla, Nio Shares Diverge: What Does It Signal For The EV Companies?

Why It's Important: Nio's founder, chairman and CEO William Li commended Uxin for its one-stop business model that provides car buyers nationwide with "high quality vehicles and comprehensive after-sales services."

Meanwhile, Joy Capital sees the investment as an attractive opportunity to take advantage of the booming used car market in China.

For Nio, this should give a sense of déjà vu.

The company was struggling with an acute cash crunch for much of 2019. Even as rumors regarding a potential bankruptcy swirled around, it received a lifeline in the form of state financial support from the local Hefei government, where its joint-venture manufacturing plant is situated.

At last check, Nio shares were down 2.79% to $45.19 and Uxin, despite the fund infusion, was down 13.32% at $4.49.

Related Link: Rumors Of A Mass Market Nio EV Surface Again

(Photo by Obi Onyeador on Unsplash)