GAC Group rumored to invest in startup NIO

Shanghai (Gasgoo)- Chinese state-owned automaker GAC Group is seeking to raise around $1 billion for future investment in the EV startup NIO, a local media outlet reported on January 15, citing people briefed on the plan.

The capital is expected to solve NIO's cash-flow issue in 2020 if the rumor was true. Responding to the request from local media outlets, NIO said the fact should be in accordance with the public company's announcement.

（Photo source: NIO)

It seems that the high-profile EV manufacturer has been long vexed by capital shortage. According to NIO's latest financial result, the company posted a net loss attributable to ordinary shareholders of RMB2,553.6 million (US$357.3 million) in the third quarter (Q3) of 2019, representing a decrease of 22.9% from the previous quarter and a plunge of 73.8% from the year-ago period.

By contrast, the vehicle sales volume has kept growing, making the capital refueling extremely urgent for the sake of sufficient production capacity. In the fourth quarter (Q4) of 2019, the startup delivered 8,224 ES8s and ES6s, jumping from 4,799 units in Q3 and 3,553 units in Q2. As of December 31, 2019, aggregate deliveries of the ES6 and the ES8 reached 31,913 vehicles, of which 20,565 were delivered in 2019, while still far from its 40,000 to 50,000 units of annual delivery target.

There were two keys words—“retrenching” and “seeking money”—which can partially generalize NIO's 2019. The EV manufacturer attempted to accelerate the cost-cutting programs by slashing workforce, selling its Formula E racing team and expanding its sales network with smaller showrooms called NIO Spaces.

“We target to reduce our global headcount to be around 7,800 by the end of the third quarter from over 9,900 in January 2019, and aim to further pursue a leaner operation through additional restructuring and spinning off some non-core businesses by year end,” NIO’s founder and chairman Li Bin said in the Q2 earnings report.

Clearly, finding new capital was much more urgent for NIO than merely trimming expenditures. In last May, the EV maker signed a framework agreement with Beijing E-Town International Investment & Development Co.,Ltd which would invest RMB10 billion in the new entity, NIO China. Nonetheless, the name of the investor wholly-owned by a state-owned assets administration has not appeared in NIO's financial report yet.

Moreover, the municipal government of Huzhou, Zhejiang Province, had ended a talk with the startup on a deal of RMB5 billion, claiming the project was too risky, according to a media outlet in October, citing local officials.

It is noteworthy that the rumored investor GAC Group and NIO co-form a joint venture, dubbed GAC NIO New Energy Automotive Co.,Ltd, which is the operator of the BEV brand “HYCAN”, and has launched the first mass-produced model “HYCAN 007” at the end of 2019.