Author：Qing Yi
On August 29, NIO updated its prospectus with the securities and exchange commission. NIO’s initial public offering of ADS per share will be priced between $6.25 and $8.25, which expects to raise up to $1.32 billion, according to the filing. That’s a bit less than the $1.8 billion that was proposed when the prospectus was first filed.
Since the filing of its IPO prospectus in the United States on August 13, NIO’s listing has become the most high-profile event outside of China’s auto market, especially with the first disclosure of a large amount of core data. It has also led to an endless discussion of NIO’s operating conditions and business model.
But just in 15 days, NIO can’t wait to update the prospectus and reduce the amount of capital raised. Why would it do that?
Revising the production
There’s no doubt that the most serious problem in the auto industry is the problem of mass-production.
As early as early 2018, NIO’s first product, ES8, has been produced and delivered to its first users. Li bin, founder of the NIO, went so far as to say that the NIO will complete pre-order orders for 550 ES8 cars by the end of June, and the pre-order order for 10,000 initial versions will be delivered in September.
But until August, NIO still failed to deliver on a large scale, and the delivery of 550 ES8 that should have been made by the end of June is also being dragged again. NIO ES8 is facing the same situation as the Model 3 – capacity cannot meet pre-orders.
The purpose to update the prospectus this time is mainly to revise and reflect the core data — output, which has been improved and changed significantly in recent years.
As of July 31, 2018, NIO has received a total of 17,000 orders for ES8 with deposit paid, produced over 1,300 ES8 units and delivered 481 ES8 units. This is clearly out of reach with Li bin’s claim that 10,000 units will be produced by the end of September this year.
The updated prospectus shows that as of August 28, NIO had produced 2,200 units of ES8 and had delivered 1,381 units to customers. As the data of the IPO prospectus is calculated as of July 31, it shows that NIO delivered 900 ES8 units in August, nearly double the delivery volume in June and July.
However, it’s still far from the 10,000 units that Mr. Li claimed to produce by the end of September.
Capital is an immediate problem
As for the updated prospectus, the total amount of the proposed capital raising is reduced from the previous high of $1.8 billion to $1.32 billion. Whether the capital reduction reflects NIO’s lack of confidence in production delivery is unknown, but there is another problem that the NIO is facing—capital.
| No. | Date | Rounds | Valuation | Amount | Percentage | Investors |
| 1 | Oct.. 1, 2017 | D | $ 1 billion | – | Tencent Industry Win-Win Fund, Ballie Gifford Lone Pine, CITIC capital,China AMC Capital | |
| 2 | Mar.16, 2017 | Strategic financing | 20 billion yuan | $ 600 million | – | Baidu capital, Tencent Industry Win-Win Fund,Warburg Pincus, IDG capital, HOPU fund, Lenovo Capital, Industrial securities, GIC Private Limited, TPG growth, ChinaEquity, CICC, Capital Today, Haitong International Security, |
| 3 | June 30, 2016 | C | $ 100 million | – | Temasek, TPG growth, HOPU capital, Lenovo Capital (USD 25 million), Hanfu Capital etc. | |
| 4 | Sept. 17, 2015 | B | $ 500 million | – | Sequoia Capital China, Joy Capital, MSA | |
| 5 | June 17, 2015 | A | ≥ 100 million yuan | – | Hillhouse Capital,Tencent Industry Win-Win Fund, Jingdong Finance, Shunwei Capital |
After several rounds of financing, NIO has raised no less than 15 billion yuan. However, this is far from Li bin’s goal—20 billion yuan, which he thinks that the capital required for a new automobile brand to be established by a startup. The huge shortfall makes NIO even more stressful
At the opening ceremony of NIO House in the Shanghai center of NIO on July 28, li bin confessed that “The loss this year is certainly more than 5.1 billion yuan”.
The prospectus shows that NIO lost about 2,573 million yuan in 2016, about $759 million or 5.021 billion yuan in 2017, and the loss in the first half of 2018 alone was about $503 million, or 3.326 billion yuan. The combined loss from 2016 to the first half of 2018 is about 10.919 billion yuan. However, NIO only has a record of income in 2018, $671 million, or about 44.4 million yuan, which is a drop in the ocean relative to the loss.
NIO is under considerable financial pressure, which forces it to the road of the IPO. Some analysts believe that it may cost 20 to 30 billion yuan to build its own factory in Jiading. However, the proposed sum of more than $1 billion may struggle to meet NIO’s current burn rates.
In any case, whether from brand building to product release, or from the beginning of delivery of an application for listing, NIO has become a pioneer in China’s new-build car industry. However, the subsequent financing pressure, as well as concerns and doubts from investors and analysts, will bring pressure to NIO. At present, it is just the beginning of a good play.
