April 29, 2020 / 8:15 AM / a month ago

UPDATE 3-Nio shares surge after it secures $1 billion investment

(Adds share price move)

By Yilei Sun and Brenda Goh

BEIJING, April 29 (Reuters) - Nio Inc's shares jumped more than 14% on Wednesday after it said it had secured a 7 billion yuan ($989 million) investment in Nio China, a new entity controlled by the Chinese electric vehicle maker.

The new investment will will smooth its cash flow and guarantee future product developments, Chief Executive William Li told a news conference, adding it will not impact its existing partnerships with Changan and GAC or the ownership structure of its New York-listed company.

The investors include state-controlled Hefei Construction Investment Holding (Group) Co Ltd, CMG-SDIC Capital Management Co Ltd, and Anhui High and New Technology Industrial Investment Co Ltd.

Nio makes ES8 and ES6 electric sport-utility vehicles in the eastern city of Hefei with state-owned JAC. The plant has capacity to build 120,000 cars annually. Nio sold 20,500 cars last year.

Li said the coronavirus epidemic had an impact on Nio's supply chain and sales in the first quarter but said the negative impact had passed.

Nio delivered 3,838 vehicles in the first three months of this year, and sales and production were recovering in March compared to February.

In a statement, the firm said Nio will inject its core businesses and assets in China, which are valued at 17.77 billion yuan, into Nio China and invest 4.16 billion yuan in it.

Nio will hold 75.9% of the new firm, and investors the rest, once the transactions are completed.

"Today's deal removes near-term solvency risk surrounding NIO, and likely means investors can refocus on things like volumes and margins," analysts at Bernstein said in a note.

The headquarters of Nio China are planned in the Hefei Economic and Technological Development Area. Nio would consider expanding capacity in Hefei if sales demand grows.

In February, Nio said it signed framework agreements with the Hefei city government to raise funds in excess of 10 billion yuan.

Nio plans further developments along with the Hefei government, Li added, but did not give further details.

$1=7.0778 Chinese yuan renminbi Reporting by Yilei Sun and Brenda Goh; Editing by Clarence Fernandez, David Evans, Kirsten Donovan

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