Chinese electric vehicle (EV) manufacturer Nio announced on Thursday that it plans to issue up to 118.8 million class A ordinary shares in offshore transactions to non-U.S. investors, as the company looks to raise funds following financial challenges highlighted in its fourth-quarter earnings report.
Nio said it intends to use the proceeds from the offering for research and development in EV technologies and new products, as well as for strengthening its balance sheet and other general corporate purposes. However, the company noted that there is no assurance the equity placement will be completed.
Following the announcement, Nio’s American Depositary Shares (ADS) fell 6.64% in pre-market trading, reaching $3.94. If the full share placement is executed at a trading price of $4 per share, the company could raise approximately $475 million. Each ADS represents one ordinary share.
Financial Position and Market Conditions
Nio has faced slowing vehicle deliveries in recent months, particularly with the lower-than-expected performance of the L60 SUV, the first model from its sub-brand Onvo. The company flagged its financial risks in its earnings report published on March 21, stating that as of December 31, 2024, its current liabilities exceeded its current assets. Despite this, Nio said it had sufficient financial resources to sustain operations for the next 12 months.
“We have been incurring losses since inception. We incurred operating cash outflow for the year ended December 31, 2024, and our current liabilities exceeded current assets as of December 31, 2024,” Nio wrote in its earnings report. The company stated that based on its liquidity assessment, it expects that its cash reserves, short-term investments, and available credit lines will be sufficient to support ongoing operations.
Nio has implemented a new organizational structure this year, introducing a Cell Business Unit (CBU) management system aimed at improving efficiency.
Profitability Targets and Strategic Outlook
Nio’s management has outlined a path toward profitability, setting a goal to achieve single-quarter profitability by the fourth quarter of 2025 and full-year profitability in 2026.
“Achieving profitability is not a complicated matter—just increase sales and keep the gross margin and expenses at reasonable levels,” Nio founder, chairman, and CEO William Li said in a March 23 interview with local media. He acknowledged that missing the profitability target would present a significant challenge for the company’s long-term development.
Li also emphasized the company’s financial discipline, noting that Nio has expensed all research and development costs rather than capitalizing them. “We have expensed all research and development costs in the reporting periods and not capitalized them, which makes our accumulated losses appear higher and our assets appear lower,” he said. “This lays a good foundation for achieving profitability in the future, because the investment has been completed in the past, and the next step is to enter the harvest period.”