More good news for Nio investors

Nope (NO 2.56%) it’s been a fun ride for investors over the past month as the stock price has surged over 65%. It had a handful of good news, including China’s government stimulus package, the fact that its new, more affordable Onvo brand is delivering vehicles, and the company received more investment. Let’s dig.

what’s going on

Over the weekend, Nio announced that it received a $1.9 billion cash infusion, but that’s a little more complicated than it sounds. Shanghai-based strategic investors including Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co. and CS Capital Co., have agreed to invest a total of 3.3 billion yuan, or about US$470.6 million, in its subsidiary NIO China.

Nio also agreed to invest 10 billion yuan, or about $1.43 billion, in cash to subscribe to newly issued shares of Nio China. This will bring Nio to a controlling stake of 88.3% in Nio China, with strategic investors and existing shareholders representing the remaining 11.7% equity stake in Nio China. Nio and strategic investors will funnel cash into Nio China in two tranches, with 70% due by November 2024 and the remaining 30% by December 2024.

“With an improved balance sheet, NIO is strategically positioned to maintain its long-term advantages in technology, products, services and the user community, advance its multi-brand strategy and penetrate broader markets and propel the company in the next stage of sustainable growth. “, according to a Nio press release.

Time matters

This cash infusion comes at a great time for Nio. The stock has already received a boost from the Chinese government’s stimulus package. As China’s economy never fully recovered from the COVID-19 pandemic, and was then further slowed by a massive property slump and a slowdown in consumer spending, China decided to cut its benchmark interest rate to seven days and reduce the amount banks must keep in reserve. .

Not only did the cash infusion come at a fortuitous time alongside China’s stimulus package, but it also came at a time when Nio was starting to expand its more affordable ONVO vehicle range. The first model, the L60 SUV, has just started deliveries. Better yet, Nio has just promised customers that ordering an L60 now will receive delivery within a year, noting that previous holdups are being resolved quickly.

Nio doesn’t stop with just one extra brand either. The third Nio brand, internally codenamed “Firefly”, is also expected to be revealed later this year, with a first model that will be something between a small EV SUV and a compact EV SUV.

Ultimately, this isn’t a massive cash infusion, but it’s worth noting, and it comes at a very opportune time for Nio and its investors as the company tries to shift to higher speeds with more affordable vehicles. How Nio’s more affordable sub-brands do in the market will be critical to growing its sales and revenue going forward. The company will face intense price competition in China’s domestic market, but it’s also a valuable market, with 51% of new passenger car sales being electric in July. This cash infusion is only slightly better news for Nio investors at a major turning point in the company’s direction.