Nio Inc. experienced a significant surge in its stock on Monday, with shares jumping nearly 16% following the announcement of a substantial cash injection totaling 13.3 billion yuan ($1.9 billion) from existing shareholders. The Singapore-listed shares of the Chinese electric vehicle manufacturer reached their highest point in almost five months, buoyed by the financial boost for its China operations.
As part of the funding effort, a consortium of strategic investors, including Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co., and CS Capital Co., has committed to invest 3.3 billion yuan in newly issued shares of Nio Holding Co., also known as Nio China.
In addition, Nio Inc. will directly invest 10 billion yuan into new shares of its China unit. Following these transactions, the parent company’s stake will decrease to 88.3% from 92.1%, while the strategic investors and other stakeholders will collectively hold the remaining 11.7%.
Morgan Stanley commented on the development, stating, “We believe this new investment will resolve the company’s fundraising debate and enhance near-term cash flow. The investment from existing shareholders of Nio China should further enhance Nio’s balance sheet.”
Despite substantial investment in the electric vehicle sector in China, Nio faces challenges due to intense domestic competition and international tariffs. To maintain a competitive edge, the company has focused on expanding its charging network and investing in research and development for battery-swapping technology and semiconductors.
The cash injections will be conducted in two installments, expected to be completed by the end of the year. Additionally, Nio Inc. retains the option to invest an extra 20 billion yuan in Nio China by the end of next year, under the same terms and pricing.
Although Nio has yet to turn a profit, it reported a loss of 4.5 billion yuan for the second quarter. However, quarterly sales soared to 17.5 billion yuan, slightly surpassing analysts’ expectations despite concerns over demand.
The strategic investors involved are affiliated with the Anhui provincial government and have a history with Nio, having previously participated in a $1 billion investment in 2020 that alleviated cash flow concerns. In December, Nio secured an additional $2.2 billion from Abu Dhabi-backed CYVN Holdings LLC.
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