Chinese electric carmaker Nio has announced a Rmb7bn ($989m) cash injection into its business in a big boost for the beleaguered group.
Chief executive William Li said on Wednesday that financial pressure on the New York-listed company was in the past after announcing the investment in Nio China, a newly established entity.
The investors are led by state-owned enterprises from the eastern Chinese province of Anhui.
The announcement comes shortly after Beijing extended subsidy support to the struggling electric vehicle sector. This will limit reductions in subsidies by 10 per cent each year, starting this year.
Nio, one of the best-known Chinese electric vehicle start-ups, has been hit hard since the country’s car market suffered its first annual reverse in three decades in 2018.
The company’s share price has fallen sharply since its September 2018 listing as it has struggled to stem cash outflow and raise new capital, causing a loss of confidence among some investors in the business.
The Covid-19 pandemic, coming on top of the market downturn, has also raised doubts over China’s ambitious goal of making a quarter of all car sales electric by 2020.
Sales of plug-in hybrid and battery-powered cars plummeted more than 80 per cent year on year in February and were still under half that of the previous year in March, the eighth consecutive month of contraction.
The Rmb7bn cash injection will be invested in instalments running up to March 2021. Nio’s New York-listed entity will invest a further Rmb4.26bn in Nio China and hold a controlling stake of 76 per cent.
Mr Li denied the investment was a state bailout and said the agreement would not affect the company’s management.
“We of course had pressure and a test of our business model last year,” but Nio had not lowered its sales forecast due to the coronavirus outbreak, he said in a call with reporters. “We think that the impact [of coronavirus] has now passed.”
Tu Le, founder of consultancy Sino Auto Insights, said the deal “puts them in a better place than any of their domestic competitors”.
He added that Nio would face an “onslaught” in the next 18 months as rivals with similar models to the company’s sport utility vehicles, such as Tesla’s Model Y, are launched in China.