Chinese electric carmaker Nio Inc is to build a 29.3 billion yuan ($4.14 billion) joint venture with local strategic investors in Hefei, East China's Anhui province, to manage its China operations, according to a definitive deal inked on Wednesday.
The investors, led by Hefei Construction Investment Holding Co, are to invest 7 billion yuan in cash for a 24.1 percent stake in the prospective partnership, called Nio China.
Nio will inject its core businesses and assets valued at 17.77 billion yuan and 4.26 billion yuan, respectively, in cash for a controlling 75.9 percent stake.
Qin Lihong, co-founder and president of Nio, said the investment from strategic investors will not affect Nio's commitment to becoming a user-centered company, adding that its excellent user community is one of the reasons why it attracted investors.
"So the partnership will not change our commitment, but make it better guaranteed," Qin said in an interview with China Daily.
He said the investment will be made in installments, and the first will be finished soon. The company said in a statement that the closing will be in the second quarter of this year, and Nio's core businesses and assets will be injected into the joint venture within one year of closing.
Nio said the joint venture will establish its headquarters in the Hefei Economic and Technological Development Area for its business operations, research and development, sales and services, and supply chain and manufacturing functions. Nio's global headquarters will remain in Shanghai.
Its current manufacturing hub built with JAC Motors is in the area as well, which has a production capacity of 100,000 vehicles per year. The plant is producing the ES8 and ES6 SUVs. It also will manufacture Nio's third model, the EC6, which will rival Tesla's Model X and hit the market in the second half of the year.
Qin said Nio will build a second manufacturing base in Hefei as well. "It is reasonable to further our cooperation with JAC now that we have signed this deal," he said.
The deal came after a tentative agreement in February. In an interview then, Nio Chairman William Li said there are about 200 employees in Hefei, and after the deal the number of people working there will continue to grow. He added that current facilities in other cities will not be affected.
Nio delivered 1,533 vehicles in March, more than double the figure in February. As of March 31, Nio's cumulative deliveries had reached 35,751 vehicles.
The carmaker said gross margin improvement is one of its top objectives in 2020. Last year, its gross margin was negative 15.3 percent, with net loss standing at $1.62 billion.
In an earnings call in March, Li said the gross margin will turn positive in the second quarter and reach a two-digit level by the end of the year, as the carmaker has been optimizing the supply chain, winning a better deal with battery producer CATL, and reducing manufacturing costs by ramping up production.