NIO Inc. (NYSE: NIO; HKEX: 9866; SGX: NIO), a leader in the global smart electric vehicle sector, has announced definitive agreements for investments in NIO Holding Co., Ltd. (“NIO China”), a subsidiary where it holds a 92.1% controlling interest. The investments involve Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co., Ltd., and CS Capital Co., Ltd, who will contribute a total of RMB3.3 billion in cash to subscribe for newly issued shares of NIO China. Additionally, NIO will invest RMB10 billion in cash to acquire more shares in NIO China. After this investment, NIO will hold an 88.3% controlling interest, while the Strategic Investors and existing shareholders will own the remaining 11.7%.
Moreover, NIO has the option to invest an additional RMB20 billion to purchase more shares in NIO China by December 31, 2025, under the same terms as the initial investment.
This investment requires regulatory and internal approvals, along with standard closing conditions. Both NIO and the Strategic Investors will make cash contributions in two phases, with 70% of their investments expected by the end of November 2024 and the remaining 30% by the end of December 2024.
The investment reflects the Strategic Investors’ strong commitment to the growth of the electric vehicle industry and their recognition of NIO’s unique strengths and market leadership. With a strengthened balance sheet, NIO is well-positioned to enhance its technology, products, and services, expand its multi-brand strategy, and enter new markets, facilitating its sustainable growth trajectory.
NIO China plays a crucial role within the parent company, being established in 2020 to handle various core functions. Its responsibilities encompass vehicle research and development, managing the supply chain, overseeing sales and services, and operating NIO Power. This subsidiary’s establishment and operations are part of the company’s strategic efforts to solidify its presence in the electric vehicle market.
We consider the above-mentioned RMB 3.3 billon fund-raising in Nio China positively, as this move reduces some investor concerns on the immediate share dilution in NIO
The new capital will bolster NIO’s balance sheet and support its multi-brand strategy as it seeks to expand its market presence and drive sustainable growth in the electric vehicle sector, says the company.
NIO currently has seven models available, including the ET7, ET9, ET5, ES6, ES8, ES7 and EC7. The company differentiates itself from other EV automakers by leveraging a massive battery swap station network.
One big step the company recently took was to launch a new, family oriented, mass-market brand. The Onvo brand’s first model began deliveries last week. The company said its mid-size family L60 SUV has received “an order intake far stronger than anticipated. On September 19, 2024, ONVO’s first model, the L60, a mid-size family smart electric SUV was launched. The L60 leverages NIO’s accumulation in smart and electric technologies, smart manufacturing, power network and supply chains. It embodies ONVO’s philosophy of bringing happiness and value for money to family users. By offering a spacious design, enhanced safety features and advanced technologies, the L60 maximizes user value while optimizing lifecycle ownership costs. Deliveries of the L60 started in late September 2024.
The Company delivered 21,181 vehicles in September 2024, representing an increase of 35.4% year-over-year. The deliveries consisted of 20,349 vehicles from the Company’s premium smart electric vehicle brand NIO, and 832 vehicles from the Company’s family-oriented smart electric vehicle brand ONVO. The Company delivered 61,855 vehicles in the third quarter of 2024, a new quarterly record representing an increase of 11.6% year-over-year. Cumulative deliveries reached 598,875 as of September 30, 2024.
NIO has teamed up with Abu Dhabi-based CYVN Holdings to enter the market in the Middle East and Africa. This partnership will allow NIO to introduce its electric vehicles and those from its subsidiary to consumers in the region.
The recent investment is seen as a strategic move among analysts that believe that it will strengthen NIO China’s position and, in turn, benefit NIO Inc.’s financial health and market valuation.
Deutsche Bank’s view is favourable to the stock price.
“We consider the above-mentioned RMB 3.3 billon fund-raising in Nio China positively, as this move reduces some investor concerns on the immediate share dilution in NIO list co,” analyst Wang Bin’s team said in a research note sent to investors today.
“In another words, we expect the share price to react positively on the ‘Nio China’ fund-raising,” the team said.
Morgan Stanley also reaffirmed its positive stance on NIO Inc., maintaining an Overweight rating and a price target of $6.10. The firm’s analyst highlighted NIO China’s recent financial boost as a positive development for both cash flow and the company’s stock price.
