Chinese EV Start-up Nio Plans to Raise $1 Billion Through Convertible Senior Notes

Chinese electric vehicle (EV) start-up Nio has announced plans to raise $1 billion through the issuance of convertible senior notes. The move comes as the company aims to reduce debt and strengthen its balance sheet amid increasing competition in the domestic market and rising losses. Nio will issue two batches of $500 million notes, which will be convertible to American depositary shares maturing in 2029 and 2030. The fundraising comes after Nio received $740 million from the Abu Dhabi government-backed firm CYVN Holdings through a previous share placement. The company intends to use a portion of the proceeds to repurchase existing debt securities and strengthen its balance sheet, while the remainder will be used for general corporate purposes.

Nio is considered one of China’s top competitors to Tesla, along with Guangzhou-based Xpeng and Beijing-headquartered Li Auto. These companies assemble premium EVs equipped with high-performance batteries, advanced in-car entertainment systems, and preliminary autonomous driving technology. However, their sales trail behind Tesla’s Model 3 and Model Y vehicles in China’s crowded EV market, which is dominated by nearly 200 players.

Nio was heavily impacted by a price war earlier this year, but experienced a strong sales rebound following its resolution. In July, the company delivered a record 20,462 EVs, followed by 19,329 units in the following month. Despite a widened net loss in the second quarter, Nio remains optimistic about its outlook and aims to deliver 55,000 to 57,000 vehicles to Chinese customers between July and September.

As Chinese EV start-ups face price competition and concerns about overcapacity, it is crucial for them to preserve cash and lower leverage ratios to ensure financial health. Nio’s move to raise $1 billion through convertible senior notes allows the company to strengthen its balance sheet and navigate the competitive landscape in the EV market.

– Bloomberg
– South China Morning Post