Electric cars

Chinese EV maker NIO steps on the accelerator to seek US$1.32 billion in US IPO

Meanwhile, Viomi Technology, a Xiaomi supplier, files application to list on Nasdaq in New York to raise as much as US$150 million.

PUBLISHED : Wednesday, 29 August, 2018, 2:23pm
UPDATED : Wednesday, 29 August, 2018, 2:52pm

NIO Inc., the flashy start-up trying to take on Tesla in China, is seeking to raise as much as US$1.32 billion in its US initial public offering – the first listing by a Chinese electric vehicle maker in the US.

The company, backed by Chinese social media giant Tencent, is offering 160 million American Depositary Shares at a price range of US$6.25 to US$8.25 per ADR, it said in a filing on Tuesday to the US Securities and Exchange Commission. At the top end, it would command a market cap of US$9.24 billion.

If NIO exercises the over-allotment option – known as greenshoe – the IPO fundraising size could hit US$1.5 billion.

NIO kicks off its IPO roadshow in Hong Kong Wednesday, and moves to Singapore on Friday and London next Monday, according to people familiar with the matter.

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NIO managers will then head to the US to give presentations to potential buyers, with stops planned in Boston, New York, Chicago and San Francisco.

Pricing is expected on September 11. The stock is set to start trading on the New York Stock Exchange on September 12.

Eight investment banks acted as joint bookrunners on the deal: Morgan Stanley, Goldman Sachs, JP Morgan, Bank of America Merrill Lynch, Deutsche Bank, Citigroup, Credit Suisse and UBS.

Before the IPO, Li Bin holds a 17.2 per cent stake in the company and Tencent owns 15.2 per cent, according to the SEC filing.

NIO is a newcomer to the rapidly growing EV market in China.

Founded in 2014 by Li Bin, NIO only launched its first production vehicle ES8 – an all-electric, seven-passenger SUV – in December of last year.

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The company claims its cars have similar performances as Tesla’s, but at half the sticker price. The ES8 sells at a base price of 448,000 yuan (about US$66,000), while Tesla’s Model X has a base price of about 920,000 yuan in China.

NIO has delivered 1,381 of ES8s, though has deposit-backed orders for another 15,700, it said.

In comparison, Tesla – the biggest-selling electric car maker in the US – sold 17,000 vehicles on the mainland last year, a jump of 51.6 per cent from 2016, according to the China Automobile Dealers Association. Tesla hopes to greatly ramp up that performance. It is setting up its Gigafactory 3 at Lingang near Shanghai’s free-trade zone, with an annual capacity to produce 500,000 electric vehicles.

NIO only started generating revenue this year, with US$7 million for the first six months. But it suffered a net loss of more than US$502 million during the same period. In 2017, it lost US$759 million.

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NIO expects its capital expenditure to reach US$1.8 billion in the next three years.

It plans to use IPO proceeds on research and development of products, services and technology, marketing and developing sales channels, building manufacturing facilities, rolling out its supply chain, and for general corporate purposes and working capital.

It noted that its challenges include “unproven and still evolving” ability to manufacture cars on large scale and on schedule, negative cash flows that could go on, and its big dependence on more than 160 suppliers of car parts.

It also noted that its growth “depends significantly on the availability and amounts of government subsidies, economic incentives, and government policies that support growth of new energy vehicles.”

Buyers of ES8s enjoy subsidies from the Chinese central government and several local governments, it added, without giving the exact amounts.

But the EV sector is bracing for complete removal of subsidies by 2020.

On the same day, Viomi Technology, which supplies IoT (internet of things) home appliances to Xiaomi, filed its application to list on the Nasdaq in the US.

Viomi plans to raise as much as US$150 million in the IPO, the filing showed.

It plans to use IPO proceeds for research and development of products and technologies, selling and marketing activities, and potential investments and acquisitions along its product value chain.

In 2017, Viomi generated a revenue of 218 million yuan and a net profit of 93.2 million yuan.