GAC clarifies ‘$1 billion investment in NIO’ but talks financing plan

On January 16, GAC Group (601238) clarified the recent media reports that GAC Group plans to invest $1 billion in NIO cars. GAC Group announced that “plans to invest $1 billion in NIO cars” media reports are not true, the two sides are currently discussing NIO’s financing plan, but is still in its early stages, no binding agreement has been formed.

No agreement has been reached

There is considerable uncertainty as to whether an agreement can be reached in the end. In the future, even if the Company participates, it is expected to participate in the investment through its subsidiaries in the form of some of its own funds, and the total amount of its own funds and raised funds is not expected to exceed $150 million, which will not have a significant impact on the Company.

On January 15th it was reported that GAC Group planned to take a stake in NIO at a quota of about $1 billion. Nio responded to the media, said that the financing projects to the listed company’s announcement.

Stimulated by the news, NIO rose more than 17 per cent before the market on January 15th, surged nearly 19 per cent in the session and triggered an intraday fuse, causing it to suspend trading on the NEW York Stock Exchange, which triggered an inquiry on the NYSE. Subsequently, NIO Automotive responded to the NYSE by saying that the company and GAC had discussed financing and strategic opportunities, that negotiations were at an early stage and that no final agreement had been reached.

By the close, NIO was up 14.10 percent at $4.29, giving it a market capitalisation of $4.52 billion. But NIO Autos fell nearly 5 percent after the market, and finally waited for GAC’s clarification, denying that it had invested $1 billion in NIO Automotive.

GAC clarifies '$1 billion investment in NIO' but talks financing plan

Early cooperation

But GAC and NIO have a long history of cooperation.

On December 28, 2017, GAC and NIO announced their cooperation in technology research and development, parts production and user operation in the new energy vehicle industry, and the two sides signed a Memorandum of Understanding on Strategic Cooperation.

Four months later, GAC NIO New Energy Energy Technology Co., Ltd. (“GAC NIO”) was established in April 2018, jointly funded by GAC Group and NIO Automobile, with a registered capital of 500 million yuan, the company is committed to the research and development, sales and services of smart network new energy vehicles.

In terms of equity structure, GAC NIO accounted for 22.5% of the shares by GAC Group, GAC New Energy accounted for 22.5% of the shares, NIO accounted for 45% of the shares, and Guangzhou, representing the entrepreneurial team, accounted for 10% of the shares. In terms of executive team, NIO’s Li Bin is the chairman of GAC NIO, Wang Qiujing, president of GAC Research Institute, vice chairman, GU Huinan, general manager of GAC New Energy, and Zhang Yang, vice president of INDUSTRIAL development of NIO, as directors, and Liao Bing, who was an assistant to GAC NIO, as the director and general manager of GAC NIO.

In the joint venture, GAC and NIO have a clear division of labor. GAC provides vehicle platforms, supply chains, factories and other resources, and NIO provides support in technology research and development, branding, user operations, energy services, etc.

In September 2018, the board of directors of GAC Group deliberated and passed the “Bill on gac NIOGN01 model project” and agreed to implement the GAC NIOGN01 model project with a total investment of 306 million yuan.

In December 2019, GAC NIO released its first production vehicle, HYCAN007. Built on GAC’s new generation of pure electric platform GEP, the car is produced by GAC’s new energy plant and supported by NIO in terms of user operations and charging services. At present, the latest news is that HYCAN007 has opened the reservation, the new car pre-sale price of 260,000 yuan, in April this year began to officially deliver users.

In early January, it was reported that GAC NIO is conducting a new round of 1.5 billion yuan of financing, which is mainly used for research and development, user operation brand and channel maintenance and operation. GAC NIO was valued at 1.5 billion yuan before the launch. In response to the financing, GAC NIO official response said, “the first round of financing is already in the closing stage, details will be announced in the future.” “