Nio, a Chinese electric car startup. NIO announced on Sunday that it received a cash injection as it ramps up its entry into the low-end market with its Onvo brand of vehicles.
What happened: Shanghai-based Nio has invested a total of 3.3 billion yuan with strategic investors including Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Emerging Industry Investment Co., Ltd. and CS Capital Co., Ltd. He said he agreed to do so. Sold cash ($470.64 million) to subsidiary Nio China. This investment replaces shares in the company.
At the same time, Nio agreed to invest 10 billion yuan (approximately $1.43 billion) in cash to subscribe to Nio China’s newly issued shares. Upon completion of the transaction, Nio will hold a controlling interest of 88.3% in Nio China. Strategic investors and existing shareholders will jointly hold the remaining 11.7% stake in Nio China.
Nio also has the right to invest an additional RMB 20 billion to subscribe for additional shares in Nio China by December 31, 2025, based on the same price and investment transaction terms.
Completion of the investment is subject to regulatory and internal approvals and the satisfaction of customary closing conditions.
Strategic investors and Nio will inject cash into Nio China in two installments, 70% by November 2024 and 30% by December 2024.
“This investment not only demonstrates our strategic investors’ resolute support for the quality development of the electric vehicle industry, but also underlines their strong recognition of NIO’s unique values and industry leadership. “The balance sheet has been strengthened,” the company said in a statement.
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Why it matters: Nio has traditionally focused on the premium electric vehicle segment and has carved out a niche for itself in China’s new energy vehicle market. The domestic market is becoming increasingly difficult due to intensifying competition and sluggish demand. The company has weathered tough times and recently marked its entry into the low-end market with the Onvo brand.
In a post on X announcing the strategic investment, the company said its business is gaining momentum, with deliveries exceeding 20,000 units for four consecutive months. Elaborating on the first model launched under the Onvo brand, Nio said the L60, a smart electric mid-size family SUV, was delivered on September 28 and orders were stronger than expected.
China’s recently announced stimulus package could also benefit the demand side. The People’s Bank of China last week cut the reserve requirement ratio, the amount of cash banks must hold in reserves, by 50 basis points in the near future, freeing up about 1 trillion yuan ($142 billion) for new loans. Then he announced. Reuters reported. He also hinted at the possibility of a gradual reduction by 0.25-0.50 percentage points. The central bank also announced that it would cut the seven-day repo rate by 0.2 points, cut the medium-term lending facility rate by about 30 basis points, and lower the loan prime rate by 20-25 basis points.
Incidentally, Nio closed on a $2.2 billion equity investment from Abu Dhabi-based investment firm CYVN Investments RSC Ltd in December. Following the transaction, the company announced that CYVN collectively effectively owns approximately 20.1% of the company’s total outstanding shares.
Nio’s New York Stock Exchange-listed ADRs closed 12.80% higher at $6.52 on Friday, according to data from Benzinga Pro.
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