Chinese electric vehicle startup Nio has received a $ 1 billion investment from several state-owned companies in Hefei in return for agreeing to establish its headquarters and participation in the city’s economic development hotspot in one of his business areas.
The capital injection comes from several investors, including Hefei City Bau- und Investmentholding-Gruppe, CMG-SDIC Capital and Anhui Provincial Emerging Industry Investment Co.
Nio’s plant is already in Hefei and is operated by the Anhui Jianghuai Automobile Group. However, the company’s headquarters and other activities are located in Shanghai, about 500 km from the provincial city of Anhui. Under this agreement, Nio will locate all of China’s activities, including R&D, sales, service and supply chain, in Hefei’s economic and technological development.
The investment is another important milestone for Nio’s long-term growth, Nio said in a statement on Wednesday.
“After receiving the investments from the strategic investors, Nio will have sufficient resources to support its business development, expand its leadership position in intelligent electric vehicle products and technologies, and provide services that exceed user expectations,” the company said, adding that the launch of Nio China’s headquarters in Hefei enables Nio to improve its operational efficiency and sustain its growth and competitiveness in the long term.
Despite the new capital, Nio faces a number of challenges, including a downturn in the Chinese automotive market. Electric vehicle sales in China decreased 4% year over year to 1.21 million vehicles in 2019. The company’s ES8 and ES6 vehicles didn’t generate the same demand as the Tesla Model 3. In the meantime, the COVID-19 pandemic continues to dampen demand as customers remain at home.
Structuring the business requires a certain mix of assets. The investment is aimed at Nio China, a recently founded business unit under Nio Inc.
Investors will invest 7 billion yuan, or $ 1 billion, in Nio’s holding company. Nio will invest its core businesses and assets in China, including vehicle research and development, supply chain and electricity, in Nio China, a subsidiary of the holding company. Nio’s parent company will also invest in Nio China.
Ultimately, investors will hold a 24.1% stake in Nio China, while Nio will hold 75.9% controlling equity of interest to the entity.
The company anticipates that investments will be completed in the second quarter of 2020 provided the customary closing conditions are met.