Nio weighs raising $3 billion

Nio Inc. is considering raising around $3 billion from investors, according to people familiar with the matter, as questions swirl around the Chinese electric carmaker’s health amid mounting losses.

Shanghai-based Nio has approached investors from the Middle East, the people said, asking not to be identified discussing matters that are private. The fundraising could happen as soon as next year, one of the people said.

In June, Nio raised around $738 million from a share sale to Abu Dhabi’s CYVN Holdings, and earlier this month sold $1 billion of convertible bonds — sparking an almost 20 percent slump in the company’s U.S.-listed shares.

The current talks are ongoing and details are subject to change, the people said. There’s no certainty Nio will proceed with the fundraising, they added.

Nio declined to comment.

Founded in 2014, Nio has yet to turn a profit and is burning through cash. The company posted a larger-than-estimated loss of more than $800 million last quarter and its market capitalization has slumped over 50 percent from a year ago to about $14 billion.

Targeting middle-class consumers and clean car early adopters in the world’s largest market, Nio has invested heavily in splashy showrooms, battery and charging infrastructure and R&D.

Its gross margin dropped to as low as 1 percent in the second quarter as Nio cut prices to survive an intense price war in China ignited by rival Tesla Inc. earlier this year.

Despite a recent rebound in monthly deliveries, Nio shipped just 94,352 vehicles in the first eight months of 2023 — less than half its annual target of 250,000.

Founder and Chief Executive Officer William Li admitted in June that Nio had been forced to delay some investment in fixed assets and be more cautious on its overseas expansion. Even so, the company last week launched an own-branded smartphone that can sync with its cars.

Nio is betting that short term investments in R&D will result in a gross margin longer term of around 20%, Li said at a recent media event. He added that he expects gross margin to bounce back to double digits in the third quarter, helped by a decrease in the price of lithium, a key component of an EV’s battery.