Nio acquires US$1 billion investment from Chinese entities

by Felicia Calle

Chinese EV startup Nio has raised a US$1 billion investment from some state-owned firms in Hefei, and in return, it agreed to establish headquarters in the city’s economic development hotspot as well as giving up a stake in one of its business units.

This injection of capital came from investors such as CMG-SDIC Capital, Hefei City Construction and Investment Holding Group, and Anhui Provincial Emerging Industry Investment Co.

Nio already has a factory operating in Hefei, which works with Anhui Jianghuai Automobile Group. However, the firm’s headquarters and other operations are in Shanghai, which is about 300 miles from Anhui. Now, Nio will locate all Chinese operations, including sales, R&D, supply chain, and service, in the Hefei Economic and Technological Development Area.

This investment is another essential milestone for the long-term growth of Nio.

“After receiving the investments from the strategic investors, Nio will have more sufficient funds to support its business development, to enhance its leadership in the products and technologies of smart electric vehicles and to offer services exceeding users’ expectation,” Nio said in a statement, adding that launching its headquarters in Hefei will enable it to improve its efficiency as well as sustain its growth and competitiveness in the long run.

This new capital is a boost as Nio has been facing a series of challenges in recent years, including a downturn in the automotive market in China. EV sales in the country declined with 4% to 1.21M vehicles in 2019, from 2018. The COVID-19 pandemic is making the situation even worse as more and more customers continue to stay home.

Structuring the deal needs some asset reshuffling. This investment is targeted towards Nio China, a business unit under Nio Inc., which was established recently.

Investors will put US$1 billion into Nio’s holding company. Nio will put the core China assets and businesses – which include supply chain, vehicle research and development, and power division into Nio China. Nio’s parent company will invest in Nio China as well.

In the end, Nio will have a 75.9% while investors will have a 24.1% stake. Nio expects the closing of investments to take place in the second quarter of the year, subject to the satisfaction of its customary closing conditions.

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