Nio plans stock sale worth US$3.12 billion as Chinese electric carmakers boost capital to challenge Tesla

Nio will price 60 million American depositary shares after close of US trading on Friday, with option to raise the size to 69 million
Stock placement, worth US$3.12 billion at current market price, could overtake recent add-on offerings by rivals Xpeng and Li Auto

Banking & finance

Alison Tudor-Ackroyd

Published: 12:23pm, 11 Dec 2020

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Nio is seeking to bolster its capital by selling more shares in the US, joining a rush of post-listing offerings by Chinese electric vehicle makers seeking to challenge industry leader Tesla.

The Shanghai-based firm plans to sell 60 million new American depositary shares (ADSs), with an option to increase it to 69 million if demand from investors is strong, according to its New York Stock Exchange filing late Thursday. It has mandated Morgan Stanley and China International Capital Corp to arrange the sale.

Nio will price the share sale after the US market closes on Friday. Based on Nio’s last-traded price of US$45.22 on Thursday, the add-on offering will raise as much as US$3.12 billion, though such offerings are typically priced at a discount to entice investors. Each ADS represents one Class A ordinary share.

The refinancing is the latest sign that Chinese new-energy vehicle (NEV) makers are stepping up the development of new smarter and premium cars as they compete with Elon Musk’s Tesla on their home turf, the world’s largest market for such vehicles.

Employees install batteries onto an electric sport utility vehicle at Nio’s production facility in Hefei, Anhui province, China. Photo: Bloomberg

Nio’s share sale follows the US$5 billion sale of common stock by market leader Palo Alto, California-based Tesla on Tuesday. Xpeng Motors said on Wednesday that it could raise up to US$2.48 billion by selling as many as 55.2 million ADSs, while Li Auto last week said it would raise as much as US$1.6 billion by issuing 47 million ADSs.

The swelling market value of Chinese carmakers such as Nio, Xpeng and Li Auto has catapulted them into the ranks of the world’s top carmakers in terms of capitalisation. Nio, considered a bellwether of China’s NEV start-ups, was worth about US$62 billion when its stock soared nine-fold to a record US$57.20 last month, making it more valuable than the century-old Ford Motor.

Xpeng, based in southern Guangdong province, also briefly surpassed Ford in value last month, after its share price soared 203 per cent. It debuted in New York in August after a US$1.5 billion initial public offering (IPO). The add-on sale about three times the IPO price.

Xpeng’s factory in Zhaoqing, Guangdong province. Photo: Iris Ouyang

Analysts said that they needed to make cars that would meet drivers’ expectations but at lower costs, to gain an edge over Tesla and its locally made Model 3.

In October, Tesla cut the starting price of the Model 3 by 8 per cent to 249,900 yuan (US$38,220). Nio’s seven-seater flagship called ES8, however, starts from 407,500 yuan after a government subsidy. Xpeng’s P7 starts from 229,000 yuan after subsidy.

Nio this month raised production at its joint-venture factory in Anhui province by 50 per cent. Thirty all-electric ES6 five-seater sports utility vehicles (SUVs) and the bigger ES8 premium SUVs roll off the production line at this factory every hour. The carmaker is on track to produce 120,000 units annually.

This article appeared in the South China Morning Post print edition as: Nio joins capital raising rush with follow-on share offer of up to US$3b

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