Nio Inc has secured credit lines worth 10.4 billion yuan ($1.48
billion) from six Chinese banks, which is expected to further
consolidate the financial fitness of the leading Chinese electric car
According to the deal signed on Friday, the lenders including Bank of
China and China Construction Bank will provide the funds to Nio China,
which is owned by Nio and located in Hefei, capital of East China's Anhui province.
"Nio China will work with the banks extensively in corporate account
system building, supply chain financing and auto financing to other
business," Nio said in a statement on Friday.
The deal came less than three months after Nio announced its
partnership with a group of State-owned investors from Hefei to set up a
joint venture called Nio China.
The investors are devoting 7 billion yuan in cash for a 24.1 percent
equity, and Nio is injecting its core businesses and assets valued at
17.77 billion yuan and 4.26 billion yuan in cash for a controlling 75.9
percent stake in the joint venture.
The deal "resolves near-term liquidity concerns around Nio," Robin
Zhu, an analyst at Sanford C. Bernstein, told Bloomberg after the deal
was reached in April.
"Investors can now go back to analyzing the demand and cashflow picture," said Zhu.
Like all electric car startups, Nio had been hindered by lack of funding until its decision to partner with Hefei investors.
Nio lost about $1.6 billion in 2019 and had $151.7 million in cash,
equivalents and short-term investments left at the end of the year.
For a while, the New York-listed company worried that it may not have enough cash to survive another 12 months.
Before its deal with Hefei investors, the company had raised at least $435 million through short-term convertibles.
Founded in 2014, Nio has been producing vehicles in Hefei in
partnership with State-owned Anhui Jianghuai Automobile Group Holdings
Like its financial conditions, its sales are turning for the better
as well. Nio delivered 10,331 vehicles in the second quarter of 2020, up
190.8 percent year-over-year.
As of June 30, 2020, the startup's cumulative deliveries reached 46,082 vehicles, 14,169 of which were delivered in 2020.
"Our deliveries in the second quarter of 2020 exceeded the high end
of our earlier projection, and we are confident that our goals on gross
margin and operational efficiency will be achieved," said Nio's Chief
Financial Officer Steven Feng.
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 a March earnings call, Nio said the gross margin will turn
positive in the second quarter and reach two digits by the end of the
year, as it is optimizing the supply chain, negotiating better deals and
reducing manufacturing costs by ramping up production.