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EV Startup NIO Announces New Joint Venture, Sends Stock 4% Higher

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【Summary】Shares in Chinese electric automaker NIO Inc. closed up nearly 4 percent Tuesday, closing at $4.00 a share after the electric automaker posted first-quarter earnings and announced it will form a joint venture with an investment corporation called NIO China.

FutureCar Staff    May 28, 2019 6:19 PM PT
EV Startup NIO Announces New Joint Venture, Sends Stock 4% Higher
The electric NIO ES8 SUV

Shares in Chinese electric automaker Nio Inc. (NYSE: NIO) closed up nearly 4 percent Tuesday, closing at $4.00 a share after the electric automaker posted its first-quarter earnings and announced it will form a joint venture called "NIO China" with an investment corporation.

The Shanghai-based maker of electric vehicles is often referred to as the "Tesla of China" and plans to offer lower-priced electric vehicles to rival costly Tesla models in China, the world's biggest auto market.

The company said in a statement today that its revenue in the three months through March was $243.1 million, down 52% from the fourth quarter of 2018, but still above analysts' expectations.

NIO said its net loss attributable to NIO's ordinary shareholders was $395.2 million, or 38 cents per share—down 25% from the year-end and 33% year-over-year.

NIO became the first Chinese EV startup to debut on the New York Stock Exchange in Sept 2018, however the automaker failed to raise as much as it hoped. Although NIO raised $1 billion with its U.S. IPO, the figure was much lower than NIO's earlier target of $2 billion to $3 billion that was previously reported by the Wall Street Journal.

NIO's target would have been the largest U.S. listing to date by any Chinese automaker.

NIO's New Joint Venture

CapitalWatch reported that NIO shares were boosted by the news it will form a joint venture with Beijing E-Town International Investment and Development Co. Ltd (E-Town Capital). E-Town will invest $1.5 billion in the new joint venture.

E-Town Capital's investment will support a new manufacturing facility for NIO's next-generation platform 2.0 (NP2) vehicles. However, both parties are still working on a definitive agreement on the investment.

NIO reported it has delivered 3,989 of its fully-electric ES8 SUV in the three months compared with 7,980 delivered in the preceding quarter. The seven-seater ES8 was released in June 2018, becoming the automaker's first electric production vehicle.

The results came as Nio exceeded its goal for 2018, delivering 11,348 ES8 models last year.

The ES8 has an all-aluminum alloy body and carries a price tag of around 448,000 yuan ($65,300) before incentives, about half the price of a Tesla Model X in China.

In December, NIO launched its second production car, the ES6, a 5-seater high-performance premium electric SUV. In April, Nio partnered with Jianghuai Automobile Group Co. Ltd. (JAC Motors) to manufacture the ES6 cars.

On the day of its IPO, NIO shares were offered at $6.26 per share. The stock rose to $9.90 on the second day of trading but have since lost their momentum.

NIO shares have been on a slide since early March when the automaker posted mounting losses for the fourth quarter of 2018 and said it expects a bigger-than-expected slowdown in deliveries in Q1 2019.

In a statement today, NIO's chief financial officer, Louis T. Hsieh wrote, "Deliveries of the ES8 in the first quarter of 2019 exceeded the Company's expectation despite headwinds from EV subsidy reductions, slowing macro-economic conditions, increased competition, and seasonal factors around the Chinese New Year holiday period,"

Hsieh remains equally cautionary about the company's Q2 outlook.

"Looking ahead to the second quarter, we expect an even more challenging sales environment and anticipate overall sequential demand and deliveries to decrease, as competition continues to accelerate and the general automobile market in China remains muted." he said.

The huge net loss resulted in NIO postponing it upcoming electric sedan, just weeks after unveiling a concept version of the car at the Shanghai Auto Show in April.

In an earnings call today, NIO founder and CEO William Li said the company's upcoming electric sedan, known as the ET7, will be built on the new NP2 platform, which resulted in a longer timeline before its production.

He added that NIO won't be able to build cars on the next-generation platform until it has its own manufacturing facility, something it hopes to accomplish with it new joint venture with E-Town Capital.

resource from: CapitalWatch, Reuters

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