Tesla’s Chinese Rival Nio Earns $1.9 Billion Investment from Strategic and Controlling Investors as It Enters Mass Market – NIO (NYSE:NIO)

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

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., agreed to invest a total of 3.3 billion yuan (US$470.64 million) in cash in its subsidiary Nio China. The investment replaces an equity stake in the company.

At the same time, Nio agreed to invest 10 billion yuan (about US$1.43 billion) in cash to subscribe to Nio China’s newly issued shares. Upon completion of the transaction, Nio will hold 88.3% of the controlling interest in Nio China. Strategic investors, together with existing shareholders, will collectively hold the remaining 11.7% equity stake in Nio China.

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

Completion of the investment is subject to regulatory and internal approvals, as well as compliance with customary closing conditions.

Strategic investors and Nio will inject money into Nio China in two tranches, with 70% to be made by November 2024 and 30% by December 2024.

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

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Why it matters: Until now, Nio has focused on the premium electric vehicle segment and has carved out a niche for itself in the Chinese new energy vehicle market. The internal market has become increasingly difficult in a context of intensifying competition and weakening demand. So far, the company has weathered adverse conditions and recently marked its foray into the lower end of the market with the Onvo brand.

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

The demand side of the equation could also benefit from the stimulus measures recently announced by China. The People’s Bank of China announced last week that it will, in the near future, reduce the required reserve ratio, which is the amount of money that banks must hold as reserves, by 50 basis points, freeing up about 1 trillion yuan ( 142 billion dollars) for new loans. Reuters reported. It also suggested the possibility of reducing it in increments of 0.25-0.50 percentage points. The PBoC also said it would reduce the seven-day repo rate by 0.2 points, the interest rate on medium-term loan facilities by about 30 basis points and preferential lending rates by 20-25 basis points.

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

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

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