File photo/Li Xing (NBD)

July 31 (NBD)-- Two months after China's Tesla rival NIO (NYSE: NIO) secured a 10-billion-yuan investment from Beijing E-Town International Investment & Development Co. (E-Town Capital), the electric carmaker set up a new company.

In an interview with National Business Daily (NBD) on Tuesday (July 30), NIO's co-founder Qin Lihong said that the new firm is established to implement the related investment plans and the 10-billion-yuan fund will be used in developing and producing NIO's NP2 vehicles.

The new company, NIO Automobile Technology Co., Ltd (NIO Technology), was established on July 24 in Beijing with a registered capital of 7 billion yuan (1.02 billion U.S. dollars).

New firm founded to bring investment into operation

Noticeably, E-Town Capital is not one of NIO Technology's shareholders. NIO's two subsidiaries, NIO NextEV Limited and NIO User Enterprise Limited, hold a 85.71 percent and a 14.29 percent stakes respectively in the new firm.  

With regard to this, Qin Lihong said to NBD that the set-up of NIO Technology serves as one of the steps to carry out the plans for the 10-billion investment from E-Town Capital, adding that the cooperation between NIO and E-Town Capital is advancing smoothly.

"The 10 billion yuan from E-Town Capital is not used for the new company's registered capital but mainly for R&D and manufacturing of NIO's next-generation platform 2.0 (NP2) vehicles," Qin explained.

Back to the end of May this year, the electric automaker announced that it signed a framework agreement worth 10 billion yuan with E-Town Capital. As per the agreement, the two parties will form a joint venture "NIO China" in Beijing and E-Town Capital will support NIO to build a new manufacturing facility to produce NIO's NP2 vehicles that will feature Level 4 autonomous driving capabilities.

NIO currently is working with its contract manufacturer JAC Motors to make cars. It remains a question whether the electric vehicle startup will continue cooperating with other manufactures or build its own plant after the establishment of NIO Technology.

Financing under progress

It's noticed that NIO has been searching for the opportunity to build its second factory after it shelved the plan to build a manufacturing plant in Jiading district, Shanghai. According to a source close to NIO, the electric automaker was looking for a place for its new production base nationwide including Beijing, Chengdu and Xi'an.

"NIO, as a manufacturing company, is still at the early stage when tremendous investment is needed. We prefer a third-party partnership to co-build a factory but a self-made plant is still an option," said previously NIO's founder and CEO Li Bin to NBD.

The deal with E-Town Capital came at the time when NIO was faced with financial strain. From the financial results, NBD noticed that NIO reported a total revenue of 1.631 billion yuan in the first quarter of 2019, representing a decline of 52.5 percent from the fourth quarter of 2018. Net loss during this period was 2.624 billion yuan, down 25.1 percent from the fourth quarter of 2018 but a 71.4 percent increase year over year.

However, NIO expects a further decrease in total revenues for the second quarter this year, with the figure expected to drop 30.5 percent from the first quarter to reach 1.134 billion yuan.

NIO is never shy about its yearning for capital infusion. Li Bin once said that the car-making business is difficult and can't be completed without 20 billion yuan.

NIO was recently reported to spin off its energy supply service subsidiary NIO Power to raise several billion yuan independently. In response, Qin Lihong declined to give details but said to NBD that NIO's financing work is under progress.

Email: gaohan@nbd.com.cn