Shares in Nio Inc. (NYSE: NIO) soared 15% Wednesday morning to $3.84 apiece after the company announced landing $1 billion in new capital from Hefei investors.
As part of the deal, the electric vehicle maker, which has been short on cash, will have to move its base from Shanghai to Hefei, a provincial city in Anhui province, The Wall Street Journal wrote. Hefei investment entities are also getting a 24.1% stake in NIO “at fair value.”
Nio was in discussions to receive city funding as early as in February.
The company’s leader, William Li, said the capital was “not a state bailout,” WSJ reported.
Nio has sought to rival Tesla (Nasdaq: TSLA) in China, but WSJ said the move may mean a shift from an innovation startup to the level of a small manufacturer staying afloat thanks to industrial state policy.
Li also said in a call with reporters today that the worst of the Covid-19 impact is now behind for the company and there won’t be much of an impact in the second quarter, CNBC reported. He said Nio’s supply chain has been operating as normal since the second half of March. Earlier, the company announced its deliveries in March doubled from the preceding month as the quarantine in China was easing off.
Earlier this month, Beijing extended subsidies, as well as a 10% tax waiver, for the EV sector until 2022 in an attempt to keep the industry growing. China’s entire auto sector has been on a slide and government support is a much-needed boost for the loss-making Nio.
In an August 2018 report by China Briefing, Hefei was called China’s fastest-growing city between 2012 and 2017. Automotive has been one of the city’s core industries and in recent years it has also expanded its new energy vehicles segment. Hefei was a pilot city under the Made in China 2025 government initiative.
Today, Anhui province celebrates a stabilized economic level, thanks to the far-reaching e-commerce. State news agency Xinhua News reported on Wednesday, “The last nine poverty-stricken county-level regions in east China's Anhui Province have been removed from the country's list of impoverished counties.”