Chinese electric vehicle maker Nio (NYSE:NIO) said that it will offer convertible notes worth USD 1.3 billion, mainly for general corporate purposes and to further strengthen its cash and balance sheet, the company disclosed on Monday after close of the US market. Initial purchasers of these securities will have the option to buy additional notes valued at USD 200 million.
The new financing comes shortly after Nio bagged about USD 3 billion in December in an offering of new American depositary shares at USD 39 apiece.
Nio’s shares advanced 6.42% on Monday after the company announced a new electric sedan, named ET7, which will have autonomous capabilities and run as far as 700 kilometers without a second charge.
“Despite the fact that Nio’s stock price has been skyrocketing, the company still faces the risk of cash shortages as the business hasn’t reached economy of scale yet, unlike Tesla, which has been profitable with about 500,000 sales last year,” Zhang Xiang, an auto analyst with a Ministry of Industry and Information Technology-affiliated think tank focused on new energy and connected vehicles, told KrASIA on Tuesday.
Zhang further explained that Nio only sold about 40,000 vehicles, raking in losses for each vehicle it delivered last year, while spending big on building up brick-and-mortar sales channels, recharging, and battery-swap stations.
Not profitable any time soon
“NIO has no capacity for a breakeven in the next two years,” said Victoria Li, a London-based auto analyst. “It will become more and more difficult for NIO to get funding when investors lose patience waiting for it to turn profitable. And this moment will come fast when the other two, Li and Xpeng, turn profitable.”
Nio passed a turbulent time in the last two years, marked by liquidity problems at the second half of 2019, which saw its stock price dive to as low as USD 1.5 in October of that year.
The company nevertheless managed to leave these difficulties behind, with additional funding and exploding revenues from vehicle sales. Nio delivered 43,728 EVs in 2020, a 112.6% year-on-year increase.