On January 5, GAC Group announced that it had agreed to increase the capital of its joint venture company GAC NIO by about 2.405 billion yuan ($370 million) by introducing strategic investors. Can GAC NIO's fate be turned around after obtaining this capital?
In the latest move, GAC Group increased its capital by about 482 million yuan through its wholly-owned subsidiary GAC Aion, and Guangdong Zhujiang Investment Intelligent Technology Investment Co.
After the completion of the capital increase, GAC Group and GAC Aion together hold 25% of GAC NIO's equity.
Beijing Business News quoted automotive industry expert Yan Jinghui as saying that the capital market has become more and more cautious about investing in new car companies in recent years, and that it is still difficult to get recognition from the capital market without good sales performance despite the backing of well-known shareholders.
For the current situation of GAC NIO, GAC seems to be a bit anxious. Before this capital increase, GAC Group said it agreed to provide GAC NIO with a 15 million yuan entrusted loan for one year.
Beijing Business Today quoted industry insiders as saying that GAC NIO, as a shareholder, is still reluctant to give up GAC NIO despite the many problems it faces.
However, against the background of increasingly fierce competition in the car market, GAC NIO, which has no new models and no sales results, can hardly be optimistic about its subsequent development even if it receives financial support, the report said.
GAC NIO was established on April 10, 2018, with GAC Group and GAC Aion holding 22.5% each and NIO and NIO Fund holding 22.5% each before the latest capital increase. The remaining 10% shares are held by the founding team to attract talent.
At the beginning of its establishment, the shareholders had great expectations for the development of GAC NIO, hoping that through the innovation of the business model of the joint venture, it would explore in pure electric vehicle development and cutting-edge technology of intelligent vehicles.
However, the last two years have not been smooth for GAC NIO.
In 2019, GAC NIO released its first product, HYCAN 007, and when the new vehicle was launched, GAC NIO expected sales to reach "15,000 units by 2020". However, when it began deliveries, GAC NIO lowered its forecast to 5,000 to 10,000 units.
In the first 11 months of 2020, the cumulative sales of HYCAN 007 were only 631 units, of which only 3 units were sold in November 2020.
In addition to sluggish sales, GAC NIO's financing progress has remained in the angel round for the past two years, and funding has become a major problem in GAC NIO's development.
In order to get more financial support, GAC NIO executives, including GAC NIO founder and CEO Liao Bing, have repeatedly contacted local governments such as Zhejiang and Henan to seek financing.
Previously, it was reported that GAC NIO might get investment from Beijing government, and if the negotiation process goes well, GAC NIO headquarters might be relocated to Beijing.
Liao Bing has said that GAC NIO will have a backup plan if the financing is not successful. "Of course people don't want to take this step in the end, but the backup plan is not that it is unacceptable, at least it can solve the staff and other problems in the end." He confessed.