Nio Dismisses Mulling $3 Billion Middle East Funding after $1.1 Billion Secured

An investor back by the Abu Dhabi Government just agreed three months ago to subscribe nearly 85 million new shares of Nio, suggesting an investment of US$738.5 million.

BEIJING, September 26 (TMTPost)— Nio Inc dismissed a report that spurred speculation about its additional funding after  though the Chinese electric vehicle (EV) maker has secured billions of dollar of funding earlier this year.

Credit:Visual China

Credit:Visual China

Nio is mulling raising about US$3 billion from investors from the Middle East and the fundraising could take place as early as next year, Bloomberg cited people familiar with the matter on Monday. Nio is in talks with potential investors and it is uncertain that the company would proceed with funding, the people said. U.S.-listed Nio shares dived as much as 7% and settled 2.1% lower that day following the news.

Nio later responded that it currently has no reportable capital raising activity, other than the recent convertible notes offering that was completed on September 25. The Shanghai-based EV company said it was aware of certain report that claimed it considered raising capital from investors has been widely circulated and triggered usual shares’ volatility, which is the reason for the response.

Prior to the report, Nio just got an extra firepower from Middle East three months ago. The EV maker announced on in June that CYVN Holdings L.L.C., an investment vehicle majority owned by the Abu Dhabi Government, agreed to subscribe 84,695,543 newly issued Class A ordinary shares for US$8.72 per share, suggesting an investment of US$738.5 million.

CYVN also signed an agreement to purchase 40,137,614 Class A ordinary shares owned by an affiliate of Tencent, one of Nio’s existing shareholders. CYNV’s equity investment in Nio through these deals totals about US$1.1 billion.  In addition, CYNV, focusing on advanced and smart mobility, agreed to jointly pursue opportunities in NIo’s international business.

The investment will further strengthen Nio’s balance sheet to power its continuous endeavors in accelerating business growth, driving technological innovations and building long-term competitiveness, William Li said. CYVN’s strategic investments in NIO are driven by its appreciation of its leading brand, innovative and premium products, and proven technological capabilities in the smart electric vehicle market, CYVN Chairman and Managing Director Jassem Al Zaabi said. He said his company is fully committed to providing strategic value that will support NIO’s international business growth.

Founded in 2014, Nio has never turned around and is still struggling for profitability. The latest report signaled how much pressure Nio was shouldering amid ongoing price war that hit the industry’s margin.  In a financial report released in August, the EV maker posted worse-than-expected financial results in the quarter ended June 30. Total revenue that quarter fell 14.8% year-over-year (YoY) to RMB8.77 billion (US$1.21 billion) that quarter, missing the analysts’ estimated RMB9.25 billion. Excluding share-based compensation expenses, and accretion on redeemable non-controlling interests to redemption value, the non-GAAP adjusted net loss per share was RMB3.28, compared with the expected RMB2.45. The net loss per share in the June quarter more than doubled the loss in the same period a year ago. Under GAAP measure, net loss that quarter widened 123% YoY to RMB6.12 billion, 27.4% more than the first quarter. 

Decline in revenue came as vehicle delivery materially slowed down.  Nio delivered 23,520 EVs the second quarter, decreasing 6.2% YoY and 24.2% quarter-over-quarter (QoQ). Vehicle sales that quarter slumped 24.9% YoY to RMB7.19 billion, down 22.1% QoQ. Besides the decrease in delivery volume, Nio said the sales drop was also due to lower average selling price as a result of higher proportion of ET5 and 75 kWh standard-range battery pack deliveries. Gross margin in the June quarter plunged 12 percentage points YoY to 1.0%, and vehicle margin was 6.2%, compared 16.7% a year earlier. Decrease in the margin was mainly attributed to changes in product mix, partially offset by the decreased battery cost per unit.

However, Nio predicted a turnaround in the third quarter. It expected delivery to be between 55,000 and 57,000 vehicles, representing an increase of about 74% to 80.3% YoY. Total revenue this quarter was expected to grow 45.3% to 50.1% YoY to a range of RMB18.9 billion and RMB19.52 billion. Both the delivery and the revenue are set to hit quarterly record.

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