NIO IPO Brings China's Electric Vehicle Technology to the World Stage

Duff & Phelps congratulates electric vehicle manufacturer NIO (NYSE: NIO) on its initial public offering (IPO) on the New York Stock Exchange on September 12, 2018.

NIO (formerly known as NextEV) is a Shanghai-based start-up specializing in high performance electric vehicles (EVs) and autonomous vehicles.

A Strategic Economic Opportunity

The rapidly expanding worldwide market for EVs shows no sign of slowing down. A recent report predicts global EV sales to increase at an exponential rate: 11 million EVs in 2025, 30 million in 2030 and 60 million in 2040.1

For the Chinese government, EVs represent a strategic economic opportunity with multiple payoffs: leadership in a growth industry, reduction of carbon emissions and decreased dependence on imported oil. As a result, public policy actively encourages EV manufacture and use – through generous rebates, strict emissions standards and continuous construction of public charging stations.2

In 2017 alone, Chinese automakers produced over 680,000 EVs,3 with the number of EVs on Chinese roads exceeding even those of the United States.

Dreams of Blue Skies

Founded in 2014 by Chinese entrepreneur William Bin Li, NIO entered the EV market with its ES8 seven-seater SUV4 and EP9 sports car, “the world’s fastest EV”.5 Prior to starting NIO, Mr. Li founded Beijing Bitauto E-Commerce Co., Ltd., a provider of web content for the auto industry, in 2000.

NIO’s Chinese name translates to “Blue Sky Coming”, a nod to the founder’s dream of emissionless cars filling the future with blue skies.

Today, the company designs, co-manufactures, and sells premium electric vehicles packed with its proprietary next-generation tech, including the onboard NIO Pilot autonomous driving assistant and NOMI (the world’s first in-car intelligent AI system).

Proceeds from the IPO will help fund an ambitious expansion plan with capital expenditures estimated at US$1.8 billion over the next three years.6 NIO’s to-do list includes rapid growth of its sales and service network, research and development for future products, upgrades for its plant in Shanghai and the launch of the competitively priced ES6 SUV to broaden its customer base.

Late-Rebounding IPO

Prior to the IPO, four previous rounds of financing raised a collective US$2.5 billion for NIO.7 The company hopes to raise an additional US$1.8 billion through the IPO, selling 160 million American depositary shares at an assumed price range of US$6.25-8.25 per depositary share.

NIO began trading at US$6.26, seeing its value dip by 15 percent before recovering to US$6.93 by the afternoon.8  The late rebound helped NIO end the day with a 5.4% gain. As of the end of trading, NIO maintained a market cap of US$7.11 billion.

Duff & Phelps was engaged by NIO as a professional independent valuer for various valuation projects.

 

Sources:

1 BloombergNEF Electric Vehicle Outlook 2018. Retrieved September 13, 2018, from https://about.bnef.com/electric-vehicle-outlook/
2 Lee, A. (2018, July 03). China's electric car market is growing twice as fast as the US. Here's why. Retrieved September 13, 2018, from https://www.scmp.com/business/companies/article/2143646/chinas-ev-market-growing-twice-fast-us-heres-why
3 CAAM (2018, January 28). NEV enjoyed strong development. Retrieved September 13, 2018, from http://www.caam.org.cn/AutomotivesStatistics/20180115/1305214916.html
4 NIO - ES8. (2018,  January 12). Retrieved September 13, 2018, from https://www.nio.io/es8 
5 Horncastle, R. (2017, February 28). The 1,341bhp Nio EP9 has broken two more lap records. Retrieved September 13, 2018, from https://www.topgear.com/car-news/electric/1341bhp-nio-ep9-has-broken-two-more-lap-records
6 Assis, C. (2018,  September 12). China's Tesla IPO: 5 things to know about Nio. Retrieved September 13, 2018, from https://www.marketwatch.com/story/5-things-to-know-about-the-ipo-of-nio-aka-the-chinese-tesla-2018-08-15
7 Crunchbase - NIO Funding Rounds. (n.d.). Retrieved September 13, 2018, from https://www.crunchbase.com/organization/nextev#section-funding-rounds 
8 Reuters. (2018, September 12). Chinese EV maker NIO slumps then bounces back in U.S. IPO [Update]. Retrieved September 13, 2018, from https://www.autoblog.com/2018/09/12/nio-shares-slump-ipo-electric-cars-china/

 

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