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Chinese EV maker NIO raises $738.5m from Abu Dhabi fund as competition intensifies in domestic market

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Chinese electric vehicle (EV) maker NIO The $738.5 million fresh capital infusion will come from Abu Dhabi government-backed company CYVN Holdings, which is strengthening its balance sheet amid an intense industry price war that has caused price-sensitive investors to switch to cheaper models.

Shanghai-based Nio said in a statement late Tuesday that first-time investor CYVN will buy 84.7 million of the company’s newly issued shares at $8.72 a share, less than its closing price on the New York Stock Exchange. 6.7% discount.News from Weilai share price soars Shares on the Hong Kong Stock Exchange fell 6.1% in a weak market.

The investment “will further strengthen our balance sheet and fuel our ongoing efforts to accelerate business growth, drive technological innovation and build long-term competitiveness,” NIO co-founder and CEO William Lee said in a statement. “Additionally, we are excited about the prospect of partnering with CYVN Holdings to expand our international presence.”

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The company added that the deal will close in early July.

Employees stand next to the ET7 sedan in a Nio showroom in Shanghai, China. Photo: Bloomberg alt=Employees stand next to an ET7 sedan in a NIO showroom in Shanghai, China. Photo: Bloomberg >

CYVN, which focuses on strategic investments in smart mobility, will also buy more than 40 million shares currently held by affiliates of Chinese technology company Tencent.

“After the investment transaction and the secondary equity transfer are completed, investors will beneficially own approximately 7% of the company’s total issued and outstanding shares,” NIO said in a statement filed with the Hong Kong Stock Exchange.

“Despite escalating competition in the domestic market, this investment is a recognition of NIO’s status as China’s top EV maker,” said Gao Shen, an independent Shanghai-based analyst. “For NIO, the fresh capital will make it a able to stick to its growth strategy for years to come.”

NIO, Beijing-based Li Auto and Guangzhou Xiaopeng MotorsSeen as China’s best response tesla Because they all assemble smart battery-powered vehicles with self-driving technology and advanced in-car entertainment systems.

Tesla is now the leader in premium EVs in mainland China, the world’s largest car and EV market.

Still, deliveries from Xpeng and NIO have been flat since late 2022 as more Chinese car buyers shift downmarket to cheaper models assembled by companies such as BYD.

From October to early January, Tesla spearheaded a fierce price war, offering two rounds of deep discounts on its Shanghai-made Model 3 and Model Y cars to mainland customers.

Last week, NIO slashed the prices of all its models by 30,000 yuan ($4,181) to boost sales and stopped free battery swaps in a bid to turn a profit in an increasingly competitive market.

Analysts at Citigroup said the discounts would only boost sales and customer awareness in the short term, but such price reductions may not sustain sales growth in the long run. This is largely due to oversupply issues in the battery electric vehicle segment, and the reduction is unlikely to stimulate demand from potential lower-end buyers and expand the existing customer base.

Beijing is determined to stimulate the electric vehicle industry, as the Ministry of Finance announced on Wednesday that car buyers will continue to be exempted from the purchase tax in 2024 and 2025.

The central government previously stipulated that the 10% purchase tax exemption policy will be valid until the end of this year.

The tax-free cap will be 30,000 yuan per car from Jan. 1, 2024, meaning buyers of luxury models above 30,000 yuan will still have to pay part of the tax, the finance ministry said.

UBS analyst Paul Gong said EV sales in mainland China are expected to rise 35% this year to 8.8 million units. Growth is projected to be much lower than the 96% increase expected in 2022.

This article was originally published on South China Morning Post (SCMP)The most authoritative voice report on China and Asia for over a century.For more South China Morning Post stories, visit South China Morning Post App or visit the South China Morning Post Facebook and Twitter Page. Copyright © 2023 South China Morning Post Publishing Limited. all rights reserved.

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