NIO-SW has teamed up with a major Middle Eastern investor

Four years ago, Li Bin and his NIO-SW were once standing on the edge of a cliff, and a 7 billion investment from the Hefei government pulled him back. Four years later, NIO-SW encountered another crisis, and this time, the Middle Eastern gold owner came to the rescue.

On the evening of June 20th, NIO-SW announced that Abu Dhabi investment firm CYVN Holdings will invest $1.1 billion (about RMB 8 billion) in it, and the two parties have signed a share subscription agreement.

According to the agreement, CYVN's investment includes two parts, investing $740 million (about RMB 5.3 billion) in NIO-SW's targeted issuance of approximately 84.69 million shares and transferring old shares of approximately $360 million (about RMB 2.6 billion), which come from a Tencent-related company.

This means that NIO-SW will directly receive RMB 5.3 billion in cash, which is another large amount of funds obtained after the Hefei investment in 2019.

According to Wall Street News, CYVN is an investment institution led by Abu Dhabi's sovereign fund. After the transaction is completed, CYVN will hold approximately 7% of NIO-SW's shares and will have the right to nominate a director.

This is a transaction with a high degree of sincerity on both sides. NIO-SW chose to finance at the low point of the stock price. This is not cost-effective, but "borrowing an umbrella on a rainy day" is not easy, and NIO-SW is currently short of money.

On the other hand, the issuance price of $8.72 per share is based on the weighted average price of NIO-SW's seven consecutive trading days before June 19, which is close to the current price of about $9. Compared with the investment in Hefei, which was "discounted by 15%" according to the average market value of the previous month before the transaction, it can also be seen that CYVN's investment is sincere.

Last year, when NIO-SW was most popular, the stock price reached about $60. This time, more than $8 is considered to have allowed the gold owner to buy the bottom; and now there are not many who can make similar investments except for sovereign funds.

According to the Preqin report of asset research institution, as of last year, the total asset management scale of Middle Eastern sovereign wealth funds reached 3.64 trillion US dollars, accounting for one-third of the total global sovereign wealth fund. And invested 89 billion US dollars last year, doubling year-on-year.

Its characteristics are large fund size, long investment cycle, high risk resistance, and more importantly, it is interested in China's new energy industry and favors luxury electric car brands. Li Bin revealed that this investment took only three weeks from discussion to final signing.

Coincidentally, in early June, the Saudi Arabian Investment Department signed a $5.6 billion investment cooperation plan with GAC Group; last year, Skywell Automobile also announced the establishment of a joint venture company with Saudi investment institution Sumou Holding.

The Middle Eastern gold owner CYVN, who invested in NIO-SW, is not just a financial investment. Li Bin mentioned that he looks forward to working with CYVN to expand NIO-SW's international business in the future. This leaves room for imagination for NIO-SW's overseas expansion in the future. Several new forces that have been favored by Saudi investment institutions have plans to build factories locally. If the follow-up cooperation between NIO-SW and Abu Dhabi Fund can be landed, it is expected to enhance NIO-SW's supply capacity for the Middle East and European markets.

However, NIO-SW still faces huge challenges. Li Bin seems to be in danger again.

Since the beginning of this year, NIO-SW's sales have been sluggish, far behind LI AUTO-W, which was born at the same time, and also surpassed by the second-tier NIO-SW. In May, NIO-SW delivered 6,155 new cars, which fell for the fourth consecutive month. In the first five months, it only sold 43,800 units, with an average of only 8,770 units per month, which has not yet exceeded 10,000.

During the same period, Aiways and LI AUTO-W had already sold more than 100,000 units, with sales of 166,000 and 104,000 units respectively. Nezha, which was originally in the second-tier, has also surpassed NIO-SW by nearly a thousand units.

Poor sales performance, coupled with financial pressure. In the first quarter, NIO-SW's asset-liability ratio reached 73.3%, an increase of 16.29 percentage points from the same period last year. At the same time, its short-term debt increased from 5.277 billion yuan at the end of last year to 7.7 billion yuan in the first quarter. At the same time, its cash on hand shrank even faster, from 45.5 billion yuan at the end of last year to 37.8 billion yuan at the end of the first quarter.

Now, the more than 5 billion yuan of support from the big gold owner will soon be in hand, and Li Bin can also breathe a sigh of relief and focus on dealing with the tough battle in the second half of the year.

How to achieve self-blood generation and breakthrough in sales is the most critical issue for NIO-SW at present. Recently, NIO-SW announced for the first time that all models will be reduced by 30,000 yuan and the free battery replacement will be unbundled, hoping to "exchange price for quantity."

After the price reduction, the rental battery version of ET5 dropped to 225,000 yuan; the price of the regular version also fell below the 300,000 yuan mark, and its competitiveness may have been slightly improved.

Moreover, in June, NIO-SW also launched two models, ET5T and new ES6, which shoulder the heavy responsibility of sales. According to NIO-SW's plan, the ET5 series and the new ES6 will contribute 20,000 units of sales per month.

NIO-SW expects that overall sales will show a significant increase in September and will return to the first tier of new forces in the second half of the year.

Industrial Securities believes that with NIO-SW's mainstream models completing replacement and price adjustments, there is potential for customer expansion, and its delivery volume and profitability are expected to continue to improve.

This year, NIO-SW's sales target is 245,000 units. As of May, it has sold 43,800 units. In the second half of the year, NIO-SW must achieve an average of 28,600 units per month to achieve this goal.

In April, Li Bin said, "If the sales volume is still 10,000 per month in the future, Li Hong and I will have to find a job." It is very similar to him in 2019.

Now, the big gold owner in the Middle East has pulled NIO-SW again, injecting new energy into this new force luxury brand automaker. Li Bin and his team need to create another miracle.