MORE FROM KrASIA

Chinese automaker GAC in talks with Nio over potential USD 150 million investment

Nio’s shares surged over 17% on the New York Stock Exchange on Wednesday.

Photo: stock.tuchong.com

Chinese automaker Guangzhou Automobile Group (GAC) announced on Thursday that it is in talks with Chinese electric vehicle (EV) maker Nio about a potential USD 150 million investment, according to a company’s press release.

Shanghai-headquartered Nio said in a separate statement that it is exploring “financing and strategic opportunities” with GAC, although “all commercial discussion remains preliminary and no definitive agreement has been entered” between the two parties.

After local media reported speculations about a cash infusion of USD 1 billion by GAC on Wednesday, Nio’s shares surged over 17% on the New York Stock Exchange. The EV maker’s stock price closed at USD 4.29, and its market capitalization reached USD 4.6 billion.

On its press release, GAC stated that the potential investment in Nio would not exceed USD 150 million, and added that the two companies had not yet reached a binding agreement.

Fundraising activities for Nio have progressed slower than expected in the past months. The company said in its Q3 report that its cash balance was not adequate to provide continuous operation in the next 12 months, and announced its preparation for several external financing projects.

Amid the gloom, Nio disclosed in May 2019 a framework agreement with Beijing E-Town International Investment and Development (E-Town Capital), a company backed by the Yizhuang district government in Beijing, securing up to RMB 10 billion (almost USD 1.5 billion) for a new entity named Nio China. However, the investment has not been finalized, according to 36Kr.

The EV startup was also reportedly in talks with the municipal government of Huzhou, a city in China’s eastern Zhejiang province, to raise at least RMB 5 billion. However, the local government denied the report in October, indicating that the project was “too risky”.

In the Q3 2019 conference call, Nio’s CTO Feng Wei said that the USD 200 million investment via convertible bonds raised in September from the firm’s CEO, Li Bin, and major shareholder Tencent, was almost completed.

Nio made a total revenue of RMB 1.8 billion (USD 257 million) in Q3 2019, up 25% from the same quarter of 2018, beating analysts estimates of RMB 1.6 billion. It also reported a narrowing net loss of RMB 2.5 billion, representing a 10.3% year-on-year decrease.

36Kr is KrASIA’s parent company.