Chinese electric vehicle startup NIO has secured a $1 billion financial lifeline from several state-owned investors led by Hefei City Construction and Investing Holding in return for agreeing to set headquarters in Heifei, the capital of Anhui province.
This move comes as NIO, often referred to as China’s answer to Tesla, is struggling to alleviate mounting concerns over its supply chain and cash-burning amid a global pandemic. NIO‘s CEO William Li said on Wednesday that the virus did affect NIO‘s supply chain, but that it has been fine since the second half of March.
As part of the deal, NIO will inject 4.26 billion yuan into a new company called NIO China that will be responsible for its China business and assets. NIO will hold 75.9% of the company and hand over 24.1% of that entity to the new investors after the completion of the strategic investment.
Reports also said that under the agreement NIO will locate all of its Chinese operations, including research and development, sales, services and supply chain, in the Hefei Economic and Technological Development Area.
The roughly $1 billion investment is expected to alleviate the company’s capital needs for a relatively long period of time. The company said the agreement will enhance NIO‘s leadership in product and technology development in the smart electric vehicle space.
NIO stock surged after the company announced the funding news. It is now poised to reach the highest intraday level in nearly two months.