Nio, falling in Hong Kong debut, really has a future?

Asian Tech Press (Mar. 10) -- U.S.-listed Nio Iinc. successfully listed on the Hong Kong stock exchange on Thursday by way of introduction, becoming the third Chinese electric car startup to list in the city after Li Auto and XPeng Inc.

With the stock code "9866", Nio opened at HK$160 ($20.46) on the first day of trading, with a market capitalization of HK$267.041 billion ($34.15 billion).

Nio stocks rose to HK$169.5 ($21.68) at one point during the trading session, up more than 5.6%. However, as of the close of trading on Thursday, the Chinese EV maker was down 0.87% at HK$159.1 per share.

Nio stocks on Mar. 10.

The fact that it fell below its secondary offering price of Hk$160 on its Hong Kong debut means that the market is not very bullish on Nio at the moment. Such performance may be closely related to the automaker's bottom-of-the-barrel deliveries among the three major electric vehicle makers in China.

Statistically, Nio continued its decline from the past four months and remained at the bottom. It delivered 6,131 new vehicles in February this year, an increase of only 9.91% year-over-year and a decline of about 36.5% sequentially.

Its two rivals, XPeng and Li Auto remained higher than Nio despite their declining deliveries.

Among them, XPeng, which has delivered more than 10,000 units for five consecutive months, saw its electric vehicle deliveries of 6,225 units in February, up 180% year-over-year and down about 51.8% sequentially.

Li Auto delivered 8,414 units of the Li One SUV in February 2022, up 265.8% YoY, ranking first among the three major manufacturers in terms of monthly deliveries.

Nonetheless, Chinese state-owned brokerage firm BOC International noted in its report that given the price range (similar to the NIO ES8) of Nio's new ET7 electric SUV, which will start deliveries in late March, monthly sales of the new moedl are expected to be around 2,000-3,000 units, and maintained its 2022 sales forecast at 160,000 units.

Furthermore, on a quarterly basis, the institution said it expects Nio's sales to stabilize at around 25,000 units in 1Q this year and 25,000-30,000 units in 2Q, with further growth in the second half of the year.

The brokerage saw more catalysts for Nio in Q2 and Q3 of this year and recommended gradually increasing holdings in Nio ahead of the ET5 launch.

Besides BOC International, 24 other institutions have given Nio a "buy + hold" rating, 3 recommended a "hold" rating, and none have a "reduce + sell" rating.

It seems that the market is still bullish on Nio, though the reaction of Hillhouse Capital is perhaps another opposite signal.

Major investor Hillhouse sold nearly 60% of its shares in Nio at the end of 2021 and significantly increased its holdings in Nio rivals Li Auto and XPeng. Among them, the long-term investor boosted its stakes in Li Auto by as much as 363% and in XPeng to 455%.

By contrast, when looking at the reduction of its holdings in Nio, Hillhouse's attitudes towards the three major Chinese EV makers are clear.

Nio, which successfully made its secondary listing in Hong Kong, looks infinitely better, but there is a big and risky gamble with the Hefei government behind it.

In late 2019, when Nio was at its darkest moment, the stock plunged to a low of $1.19, and its total market capitalization was no more than $3 billion.

In early 2020, Nio was in a life-or-death crisis due to a cash flow shortage. At that time, the automaker was looking for funding, with no follow-up from local governments such as YBeijing's Yizhuang economic development area and Huzhou city in Zhejiang Province, and also no follow-up from rumors with Chinese traditional car companies such as BAIC Group, GAC Group and SAIC Motor Corp.

Finally, it was the Hefei government that came to the rescue of the truggling Nio by signing a 7 billion yuan equity financing deal with it.

filing by the automaker on Monday with the Hong Kong stock exchange showed that after the Hefei government has infused 7 billion in 2020, Nio has redeemed its shares in 3 instalments. The first redemption had no premium, and the second and third time it bought back shares for a total of 7 billion yuan.

And now the Hefei government still holds 7.886% of Nio shares, and would also earn a net $2.53 billion according to Nio's market value of around $32.08 billion for March 9, 2022.

According to the details of the bet-on agreement between Nio and the Hefei government disclosed in the HKEx filing, Nio China must either launch a qualified initial public offering in July 2024 or fail to do so in July 2025, then it must redeem the stake held by the Hefei strategic investor.

However, the previously disclosed terms of the bet-on agreement are even stricter, requiring "Nio China reach revenue of 14.8 billion yuan in 2020, revenue of 120 billion yuan in 2024 (with 6-8 models on the market), total revenue of 420 billion yuan and total tax revenue of 7.8 billion yuan from 2020 to 2025, and list on Shanghai Sci-Tech Innovation Board (STAR Market) before 2025."

Nio, at least according to its current situation, is unlikely to reach 420 billion yuan in revenue unless it completes largest mergers and acquisitions. And if such takeovers are to be completed, it may be a drop in the bucket to rely on the $50 billion Nio now has on hand, and besides, there are no good targets in electric vehilce industry.

To stir up bullishness in the market, Nio is continuing to push forward with its global layout. In 2022, its products and full system services, will formally land in Germany, Netherlands, Sweden and Denmark.

By 2025, Nio plans to serve customers in more than 25 countries and regions around the world. As of March 10, it has 384 stores worldwide.

In 2022, Nio will also deliver three new models based on the NT2.0 autonomous driving technology platform, the smart electric flagship sedan ET7, the mid-size smart electric coupe ET5 and the mid-size SUV ES7.

The person in charge of relevant business at Nio said that based on the frequent new push in 2022, the company's product lineup will continue to be improved.

(US$1 = HK$7.819)

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