After sales in the first quarter exceeded expectations, NIO ushered in good news.
On the afternoon of April 29, the final agreement of “7 billion investment” between NIO and strategic investors was finalized.
Affected by this news, NIO’s stock price rose 14.67% pre-market, and once rose nearly 20% after the opening.
A number of A-share NIO concept stocks also performed well.
NIO Came to China to Get 10 Billion “blood Transfusion”: the Chinese Headquarters Finally Landed in Hefei
As early as February 25 this year, NIO signed a cooperation framework agreement with Hefei City.
On the afternoon of April 29, NIO announced the final signing of the “7 billion strategic investment agreement” through its official WeChat account.
NIO said that under the investment agreement, strategic investors will invest 7 billion yuan in NIO China.
In addition, NIO will invest RMB 4.26 billion in NIO China. Upon completion of the transaction, NIO will hold a 75.9% controlling stake in NIO China, and strategic investors will hold a combined 24.1% stake.
The 7 billion yuan injection from strategic investors and the 4.26 billion yuan injection from NIO add up, and NIO China has received more than 10 billion yuan this time.
The list of strategic investors in this investment is also very eye-catching, including Hefei Construction Investment Holdings (Group) Co., Ltd., SDIC Investment Management Co., Ltd. and Anhui High-tech Industry Investment Co., Ltd.
In addition, the Hefei Economic and Technological Development Zone has also reached an agreement on the occupancy of NIO’s China headquarters. NIO, which has its global headquarters in Shanghai, will have its China headquarters in Hefei this time, which means that NIO will operate a “dual headquarters” model in China.
According to the agreement signed between NIO and Hefei Economic and Technological Development Zone, NIO will set up a China headquarters in Hefei Economic and Technological Development Zone, establish an integrated base for headquarters management, R&D, sales and service, and supply chain manufacturing, and start the planning and construction of a second manufacturing base in a timely manner. Hefei will also fully support the establishment of NIO’s China headquarters and the subsequent construction of R&D and manufacturing bases.
At the same time, NIO will also inject into NIO (Anhui) Holdings Co., Ltd., the legal entity of NIO China, core businesses and related assets in China, including vehicle research and development, supply chain and manufacturing, sales and services, and energy services, which are valued at RMB17.77 billion based on 85% of NIO’s average market capitalization for the 30 public trading days prior to April 21, 2020.
In fact, the relationship between NIO and Hefei has always been relatively “close”, as early as 2016, NIO’s production workshop landed in Hefei. In April 2016, NIO signed the Manufacturing Cooperation Framework Agreement with Jianghuai Automobile in Hefei, officially confirming the “OEM production” of JAC to NIO.
As for the reasons why Hefei chose NIO, Li Bin said, “Hefei has seen NIO’s competitive advantage from research and development to user service to the entire system in recent years, and has seen the growth step by step in recent years.” ”
NIO said that obtaining this strategic investment and the establishment of NIO’s China headquarters in Hefei is another important milestone in NIO’s development. NIO will have more funds to support business development.
NIO also mentioned that the establishment of NIO’s China headquarters in Hefei will help Hefei form a global innovation leadership capability in the field of intelligent electric vehicles, create a new growth pole for economic and social development, inject new impetus into the higher quality integrated development of the Yangtze River Delta region, and become a model for China’s automobile industry to improve quality and efficiency, transformation and upgrading.
Huge Loss of $10 Billion in 2019: Tight Cash Flow and Urgent Need for Financing
The automobile industry is a capital-intensive industry, and most of the “new forces in car manufacturing” are facing the problem of “burning money” and “losing money”, and NIO is no exception.
From 2016 to 2018, NIO’s net losses were -2.536 billion yuan, -4.985 billion yuan and -9.66 billion yuan, respectively, and the loss range increased year by year.
NIO’s 2019 annual report released in March showed that NIO suffered a huge loss of about 11.4 billion yuan in 2019, and its stock price plunged 16.21% on the day of the annual report.
From the perspective of sales volume and operating income, NIO’s performance last year was very eye-catching. In 2019, NIO delivered 20,565 vehicles, up 81.2% year-on-year from 11,348 units in 2018. NIO’s revenue growth was greatly boosted by the increase in sales volumes, and in 2019, NIO’s operating income increased significantly to RMB 7.825 billion, a year-on-year increase of 58%.
However, NIO seems to have fallen into the vicious circle of “selling more and losing money”, and it still loses tens of billions of dollars a year despite a large increase in revenue. Based on NIO’s sales volume and net profit in 2019, it lost 554,300 yuan for every car sold last year.
On June 27 last year, affected by the battery fire accident, NIO announced the recall of some NIO ES8 electric vehicles, a total of 4,803 vehicles, Guangzhou Daily said that the number of recalls accounted for nearly one-third of the delivered vehicles, which also increased the performance pressure of NIO to a certain extent.
Last year, NIO founder Li Bin explained: “As a young company, it is impossible to say, you come up and make a lot of money, unrealistic, Tesla lost 16 years, we have only (started) for more than 4 years… This is the same as you cannot ask a 4-year-old child to support a family.” ”
As of September 30, 2019, NIO was insolvent, with net liabilities of RMB6.278 billion and only RMB863 million in cash and cash equivalents on book.
NIO CEO Li Bin said on the conference call that the cash balance is not enough to provide the working capital and liquidity needed for ongoing operations in the next 12 months.
Last year, NIO laid off 1,200 employees, accounting for about 10 percent of its workforce. Recently, there have been continuous reports of NIO employees’ salary delays and encouraging employees to voluntarily participate in the replacement of “13th salary” with a restricted stock plan.
NIO’s senior management team is facing the problem of frequent employee departures. Last year, Xie Dongying, the financial director who had been in charge of NIO’s U.S. IP, left. At the end of March this year, Zhao Yuhui, former vice president of NIO User Center, left to join Great Wall Motor as the general manager of the user center of the sales company. In early April, Zhu Jiang, vice president of NIO’s user development, will step down at the end of May, and Huang Chendong, senior vice president of NIO’s electric power engineering team, announced that he will step down on June 30.
Under the “internal worry”, there are more “external troubles”, and with Tesla’s entry into China, the competition faced by NIO will become more and more fierce.
Against the background of tight financial conditions, frequent departures of senior executives, and intensified external competition, Li Bin was dubbed “the worst person in 2019” by self-media. At this critical moment of “life and death”, NIO’s need for financing is becoming more and more urgent.
Cumulative Financing Exceeds 30 Billion: Recent Financing is Full of Twists and Turns
At the beginning of its establishment, NIO received capital injections from Temasek, Sequoia, Hillhouse, Lenovo, Tencent, Baidu, Warburg Pincus and many other institutions.
According to Tianyancha data, in addition to the 7 billion yuan financing, NIO has obtained a total of more than 4.287 billion US dollars in financing in its history, equivalent to about 30 billion yuan.
The negotiation of the 7 billion yuan financing was quickly launched by the two parties from New Year’s Day, to the signing of the framework agreement in February, and finally the signing of the final agreement in April, and the financing process was very smooth.
Previously, NIO founder Li Bin also mentioned in an interview with Tencent News “Frontline”, “NIO’s contact with Hefei has been around for a while, and the real faster start is after New Year’s Day, and the formal signing of the framework agreement today is indeed very fast.” ”
Before that, NIO’s financing experience in the past year can be described as a twist and turn.
On May 28 last year, NIO announced that it had signed a framework agreement with Beijing Yizhuang International Investment and Development Co., Ltd. (hereinafter referred to as “Yizhuang SDIC”), obtaining a financing amount of 10 billion yuan. According to the framework agreement signed by the two parties, NIO would have established a new entity “NIO China” in the Beijing Economic and Technological Development Zone and injected specific businesses and assets into “NIO China”, and Yizhuang SDIC would contribute RMB 10 billion in cash to “NIO China” through its designated investment company or joint other investors.
However, after the signing of the framework agreement, the framework agreement between NIO and Yizhuang Guo has not made substantial progress.In this regard, Li Bin said, “From the framework agreement to the final agreement, there is a relatively complex process in between, some framework agreement projects advance relatively quickly, and some projects will be implemented more slowly.” Regarding the cooperation with Yizhuang SDIC, the final agreement shall prevail. ”
In October 2019, it was revealed that it had signed a 5 billion yuan financing agreement with Wuxing District, Huzhou City, Zhejiang Province, and was subsequently denied.
In January, Reuters reported that GAC Group was planning to take a stake in NIO. GAC also said that “there is still a lot of uncertainty about whether an agreement can be reached.” NIO officials responded that the above news is subject to the company’s announcement.
In February this year, it was also reported that Geely Automobile would spend $300 million to buy a stake in NIO. NIO said it did not make any comments on external rumors. ”
In addition to this US$7 billion financing, the amount of financing projects completed by NIO in the past year is relatively small. In the third quarterly report of 2019, NIO mentioned that it will obtain US$200 million in convertible bond financing from Tencent and Li Bin, respectively, which was completed in February this year.
On the evening of February 6 this year, NIO announced that it had recently completed a cumulative $100 million convertible bond financing project, amounting to $70 million and about $30 million, respectively.
How Do Dual Headquarters Coordinate
NIO’s “global headquarters” is located in Shanghai, and after the establishment of its “China headquarters” in Hefei, how to coordinate between the two headquarters has become the focus of attention.
In fact, dual headquarters in different cities in the same country are not very common in the automotive industry.
From the perspective of international car companies, Toyota’s global headquarters and Japanese headquarters are located in Tokyo, Japan, Mercedes-Benz’s global headquarters and German headquarters are located in Stuttgart, Germany, and the same is true for Audi, Volkswagen, BMW, Ford, General Motors and other car companies.
Among the Chinese automakers, Geely Automobile has its global headquarters and China headquarters in Hangzhou, Zhejiang Province, and Great Wall Motor’s global headquarters and China headquarters are both located in Baoding, Hebei Province. BYD Auto’s global headquarters and China headquarters are located in Shenzhen, China.
NIO’s global headquarters and headquarters in two cities have been met with many questions.
On the one hand, NIO’s main business is still in China, overseas sales are not high, and last September, NIO’s Silicon Valley office in San Jose, California, laid off 62 employees. When the overseas business has not developed to a certain size, the establishment of dual headquarters is slightly redundant, and additional operating costs will be incurred.
On the other hand, the market is also worried that the dual-headquarters structure will increase coordination costs and reduce NIO’s operational efficiency.
In this regard, NIO founder Li Bin said in an interview with the media that NIO’s factory was originally in Hefei, and about 200 people had worked in Hefei before, and it was logical to headquarters China in Hefei, while reducing labor costs.
Qin Lihong, co-founder and president of NIO, also told the first financial reporter, “It has nothing to do with the governance and registration of listed companies, and will not involve the relocation of companies and personnel.” The Chinese headquarters is located in Hefei, while Shanghai is still the location of NIO’s global headquarters, and the establishment of the China headquarters will not affect the further cooperation and investment between NIO and Shanghai. In addition to some necessary operational optimization, there will be no ‘sporty’ personnel optimization. ”
Sales in the First Quarter Exceeded Expectations: Li Bin Said That Gross Profit Will Be Positive in the Second Quarter
In the current difficult times, NIO not only obtained financing, but also bucked the trend to achieve sales growth, which can be described as “double happiness”.
On the evening of April 7, NIO released its March sales data, delivering a total of 1,533 new cars in the month, an increase of 11.7% year-on-year and 116.8% month-on-month; A total of 3,838 units were delivered in the first quarter of this year, exceeding the target of 3,400-3,600 units expected in the fourth quarter of 2019. Under the influence of the epidemic, it is not easy for NIO to achieve such results.
NIO said that the results in March and the first quarter were mainly due to products and services that withstood the test of the market, while innovation in marketing during the epidemic, fine management in supply chain, and the gradual resumption of offline stores made NIO confident in sales growth in 2020.
In addition, the extension of subsidies and purchase tax exemptions for new energy vehicles has also strengthened market confidence.
Feng Wei, NIO’s Chief Financial Officer, said: “As China has basically brought the coronavirus epidemic under control at this stage, we will continue to work closely with our supply chain partners to resume normal production. At the same time, it remains committed to expanding NIO Space and integrating online and offline sales channels to further promote order growth. ”
NIO founder Li Bin said that with the continuous support of a loyal user community, the number of orders has increased since February.
Li Bin even said in the conference call that the optimization of the supply chain, the continuous reduction of battery pack costs, the increase in production scale and the decline in vehicle manufacturing expenses brought about by management optimization have given NIO confidence to achieve positive gross profit margin in the second quarter and is expected to achieve double digits by the end of the year.
Source: 中国基金报
