An investment arm of the Abu Dhabi government struck a deal this week to invest more than $1 billion in Shanghai-based electric car maker Nio, a sign of growing Arab-Chinese business ties and the oil-rich Middle Eastern nation’s economic diversification. latest example of globalization efforts.
NIO said on Tuesday it had agreed to sell 84.6 million shares, or about $738 million in cash, to mobility-focused investment firm CYVN Holdings at $8.72 a share. NIO also said Tuesday that CYVN also agreed to buy another 40.1 million shares from an affiliate of NIO’s existing shareholder Tencent, one of China’s largest internet companies.
The Tencent subsidiary completed the sale yesterday, according to a filing with the U.S. Securities and Exchange Commission on Friday. CYVN paid $350 million for these additional shares, bringing its total investment in NIO to nearly $1.09 billion.
The Abu Dhabi government fund will hold a combined 7% stake in NIO and have the right to nominate a director to the board of directors. NIO and CYVN also agreed to “cooperate and jointly pursue opportunities for NIO’s international business,” according to the NIO statement.
The huge investment underscores the growing influence of China’s auto industry and electric vehicle makers. China has become the world’s largest auto market, and this year it also became the largest auto exporter. NIO will deliver 31,041 vehicles in the first quarter of 2023, a year-on-year increase of 20.5%.
Jassem Al Zaabi, chairman of CYVN, said NIO’s investment was “our appreciation for its leading brand, innovative and high-quality products, and mature technological capabilities in the smart electric vehicle market”. He added in the statement that CYVN is “fully committed to delivering strategic value and supporting NIO’s international business growth.”
NIO chairman Li Bin said Abu Dhabi’s capital would strengthen NIO’s balance sheet and help build long-term competitiveness. Li Ka-shing, who founded NIO in 2014, is now worth $1.4 billion on the Forbes Real-Time Billionaires List. The company ranked No. 1,915 on the Forbes Global 2000 list of public companies published earlier this month and was listed on the New York Stock Exchange in 2018.
The agreement was signed days after China and the Gulf Cooperation Council, an economic bloc of Middle Eastern countries that is one of the world’s fastest growing regions, wrapped up a high-profile Arab-Chinese business meeting in Riyadh. The meeting made international headlines for the size of the business deals announced — some two dozen agreements worth more than $10 billion. The announced deal includes a $5.6 billion investment from Saudi Arabia’s Ministry of Investment and Chinese electric car maker Human Horizons.
The event also drew attention as relations between China and a region traditionally close to the United States heat up. The Gulf Cooperation Council (GCC) members include the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait.
Middle East sovereign wealth funds are increasingly active in Asia, Claudine Colletti, editor-in-chief of Forbes Middle East, said in an interview earlier this month. For example, Abu Dhabi’s Mubadala partnered with CDB Capital and China’s State Administration of Foreign Exchange in 2015 to set up a $10 billion fund to invest in projects of “strategic and commercial importance to China”. Today, Mubadala has an office in Beijing, has more than $5 billion in committed capital, and has invested in more than 70 companies, including social media Kuaishou and electric car maker Xpeng Motors. Colletti pointed out that Qatar Investment Authority, Abu Dhabi Investment Authority and Kuwait Investment Authority have also taken measures to invest in China.
Earlier this year, Saudi Arabia’s Public Investment Fund invested $265 million in a Tencent-backed Chinese esports company. In addition to China itself, Middle East sovereign wealth funds are also interested in building stronger ties and looking for opportunities in other Asian markets, Colletti said.
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