Shanghai, China – Electric vehicle maker Nio Inc. experienced a significant surge in its stock price on Monday following the announcement of a substantial cash injection totaling 13.3 billion yuan, equivalent to $1.9 billion, from its current shareholders. The move, which was warmly received by investors, saw the Singapore-listed shares of Nio rallying by almost 16%. This financial boost was a result of the reinforcement of its China unit with a combination of the company’s internal funds and contributions from strategic investors.
The groundbreaking venture involves a group of strategic investors, including Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co., and CS Capital Co., who have committed to investing 3.3 billion yuan in cash for new shares of Nio Holding Co., also known as Nio China, as per a statement released by the company on Sunday. Additionally, Nio Inc. has planned to inject another 10 billion yuan directly into new shares of the unit. These investments will ultimately lead to a reduction in the parent company’s stake from 92.1% to 88.3%, with the strategic investors and other stakeholders collectively holding the remaining 11.7%.
The infusion of funds from existing shareholders has been heralded as a solution to Nio’s fundraising challenges and is expected to improve the company’s cash flow in the near future, according to analysts at Morgan Stanley. Despite China’s significant investments in the electric vehicle industry, Nio faces stiff competition and challenges such as overseas tariffs. To maintain a competitive advantage, Nio has focused on expanding its charging network and investing in battery-swapping technology. The cash injections are set to be completed in two installments by the end of the year, with Nio Inc. retaining the option to invest an additional 20 billion yuan in Nio China by the end of the following year.
Amid concerns over the company’s cash burn and lack of profitability, Nio reported a loss of 4.5 billion yuan in the second quarter, despite a surge in quarterly sales to 17.5 billion yuan. The partnership with Hefei Jianheng and Anhui Provincial Emerging Industry Investment, affiliated with the government of Anhui province, is a strategic move that follows a previous $1 billion investment in 2020. This latest cash injection from existing shareholders is expected to bolster Nio’s financial position and support its ongoing efforts to lead in the competitive electric vehicle market.