Shares of Chinese electric vehicle maker Nio (NIO) are trading higher Monday morning on news that Abu Dhabi-based CYVN Holdings will invest $2.2 billion into the company. Once the deal closes, CVYN will own close to a 20% stake in Nio. This marks the second major investment from CVYN in recent months after its initial cash infusion this past July.
Yahoo Finance’s Brad Smith and Seana Smith break down the details.
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Video Transcript
BRAD SMITH: NIO getting a big investment this week. Abu Dhabi-based CYVN Holdings investing $2.2 billion. And once the deal is completed, it will own about 20% of the EV carmaker. This is the first investment in the carmaker. They invested over $738 million this past summer. It does come at a time for NIO where investors have been continuing to try and wrap their minds around exactly what production deliveries will look like going forward for a very capital-intensive operation and what margins will ultimately look like and that kind of base layer that they can anticipate the company will be able to repeatedly deliver. But for a lot of these EV companies, just trying to maintain profitability has been the challenge.
SEANA SMITH: Yeah, exactly. Especially when you take into account the rising competition, exactly how that’s playing out through price wars and everything that’s going on over in China, trying to boost adoption of EVs, and also have a bigger presence here within that market. But when it comes to NIO sales, yes, they are improving, but they’re still very far off of their annual goal, which is 250,000 EVs in 2023.
We know that they have been forced to cut back on their staff just a bit because of some of these challenges here that we have been talking about. They trimmed about 10% of their staff. They’ve also spent around $450 million to purchase production assets from their partners here in order to save in the long term on manufacturing costs.
So once again, you’re seeing many of these EV players doing everything they can to grow their business at a time when they are trying to put the least amount of pressure on their margins. In many cases, they were not able to do that. We’ve seen some of these concerns reflected in the stock price of NIO this year with shares off just about 17% since the start of the year. But really, we have seen a big fall to the downside since their highs earlier this year just about in August, when it was above $15 a share. Here we are today, still below $8 here ahead of the open.