Nio gets $2 billion investment from Abu Dhabi government fund

Company News

by Glenn Dyer

Chinese electric vehicle (EV) manufacturer, Nio, has secured a second investment this year worth billions of dollars from the government wealth fund of Abu Dhabi, resulting in the Gulf state gaining control of approximately 20.1% of the company.

The deal, which was revealed on Monday, will see Nio receive $2 billion from the Abu Dhabi government fund, CYVN Holdings.

Nio, one of the top three premium EV makers in China, was launched in 2014 but has yet to turn a profit. Its primary competitors are Xpeng and Li Auto.

In contrast, industry heavyweight BYD competes in the mid to lower price ranges and has dominated the entire sector, thanks in part to its significant battery business, which ranks second globally, after CATL.

One of Nio's most innovative concepts is the battery swap. The company has established over 1,000 stations across China where customers can exchange batteries (a process that takes three to five minutes) instead of recharging, directly competing with traditional recharging stations.

Back in July, Nio agreed to a $738.5 million strategic equity investment from CYVN, which also acquired certain shares of Nio's class A ordinary shares from a Tencent affiliate at that time, for a total consideration of $350 million.

This initial investment granted the Abu Dhabi fund approximately 7% ownership of Nio, and with the latest deal, this ownership stake will rise to 20%. Additionally, they will have the right to appoint two board seats as long as their investment remains above 15%, and one board seat if their interest falls between 5% and 15%.

Nio's founder, chairman, and CEO, William Li, expressed his enthusiasm for CYVN's vision and said, "With the enhanced balance sheet, Nio is well-prepared to sharpen brand positioning, bolster sales and service capabilities, and make long-term investments in core technologies to navigate the intensifying competitive landscape."

He added, "We are confident that Nio will further solidify its leading position in the transformation of the automotive industry."

This second investment follows reports that Nio experienced a decline in sales and revenue in the first half of 2023, with the company's profit margin falling to just 1%. However, as deliveries improved in the second half of the year, Nio's financial position saw improvement in the third quarter, with record revenue levels and an 8% rebound in gross profit.

To reduce operating costs, Nio recently cut approximately 10% of its positions.

Furthermore, Nio is considering selling or spinning off its battery-making operations, as it aims to achieve profitability more rapidly. William Li stated that he doesn't foresee the battery operations contributing positively to profits over the next three years, prompting the exploration of alternative options.

Nio has also announced that it will not launch new models in 2024, focusing instead on selling its existing eight models. A highly anticipated flagship vehicle, the ET9, originally scheduled for launch this Saturday, will now debut in 2025.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

Subscribe to our Daily Newsletter?

Would you like to receive our daily news to your inbox?