Chinese electric vehicle startup Nio, Inc. (NIO) announced on Sunday that it has received a significant cash infusion of 3.3 billion yuan ($470.64 million). This strategic investment comes at a time when Nio is aggressively expanding into the lower-end market with its new Onvo brand of vehicles.
The investors, including Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co., Ltd., and CS Capital Co., Ltd., will receive an equity stake in Nio China, Nio’s subsidiary. In a parallel move, Nio itself will invest 10 billion yuan (about $1.43 billion) in Nio China by subscribing to newly issued shares. Once the transaction is finalized, Nio will hold a controlling interest of 88.3% in Nio China, with the remaining 11.7% split between strategic investors and existing shareholders. Nio also retains the right to invest an additional 20 billion yuan to subscribe to more shares in Nio China by December 31, 2025. The completion of this investment is contingent upon regulatory approval, internal clearances, and customary closing conditions.
The cash injection will be delivered in two installments, with 70% due by November 2024 and the remaining 30% by December 2024. Nio stated in a press release that this investment reflects strong support for the electric vehicle industry’s high-quality development and underscores the strategic investors’ recognition of Nio’s unique values and leadership position. The company anticipates that the enhanced balance sheet will further propel its growth.
Nio’s move into the lower-end market with Onvo is a strategic response to the intensifying competition and softening demand within the Chinese new-energy vehicle market. Previously focused on the premium segment, Nio is now seeking to broaden its reach by targeting a larger customer base with its Onvo brand. The launch of the Onvo L60, a smart electric mid-size family SUV, on September 28, saw stronger-than-expected order intake.
The company’s optimistic outlook is further supported by recent positive developments in the Chinese economy. The People’s Bank of China (PBoC) announced last week that it will reduce the reserve requirement ratio for banks, freeing up approximately 1 trillion yuan ($142 billion) for new lending. The PBoC also indicated a potential further reduction in the reserve requirement ratio by 0.25-0.50% points. Additionally, the PBoC announced a reduction in the seven-day repo rate, the interest rate on medium-term lending facility, and loan prime rates. These measures are expected to boost economic activity and stimulate demand.
This recent investment follows Nio’s December 2023 acquisition of $2.2 billion from CYVN Investments RSC Ltd., an Abu Dhabi-based investment vehicle. Following the transaction, CYVN now holds approximately 20.1% of Nio’s outstanding shares. Nio’s NYSE-listed ADRs closed Friday’s session up 12.80% at $6.52.
The cash infusion and expansion into the lower-end market demonstrate Nio’s commitment to navigating the evolving landscape of the electric vehicle industry and solidifying its position as a leading force in China’s rapidly growing new-energy vehicle sector.
