Tencent places bigger bet on struggling EV maker Nio

Industry watchers say the move shows Tencent’s confidence in the loss-making auto manufacturer.

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Chinese electric vehicle maker Nio will raise USD 200 million by issuing convertible bonds to its founder and CEO, Li Bin, and to an affiliate of Tencent Holdings, Nio’s regulatory filing shows.

Tencent, which backs Nio, and chairman Li, will each subscribe to buy USD 100 million of the convertible bonds.

The company’s stock trading on Nasdaq rose 7% and closed at USD 2.95 per ADS on Thursday in the wake of the move, but was still way below its initial public offering price of USD 6.26. Nio gained USD 961 million in net proceeds in that IPO in September 2018.

However, the Chinese company has been making huge losses and it has been lagging behind its sales target of between 40,000 and 50,000 units this year.

Nio booked USD 390.9 million in net losses in the first quarter of this year, up 71.4% year-on-year. It’s also undergoing a layoff which is expected to last till the end of this month and affect 1,000 employees.

The EV maker sold only 8,379 vehicles by the end of July, fulfilling only less than 30% of its annual sales target. The company recently rolled out a pilot policy allowing buyers to go away with a new vehicle without initial payment at all.

Customers will have to sign a 5-year installment loan contract with an annualized interest rate as low as 1.29%, a more moderate interest than the 5-year benchmark annual lending rate of 4.75% set by the People’s Bank of China, the country’s central bank.