On the afternoon of February 25, Nio announced that the Nio EC6 mass production project was launched in Hefei, and a strategic cooperation framework agreement was signed with Hefei City.
At this point, after almost a month of funding shortages, Li Bin and Qin Lihong finally took the respite. Before the U.S. stock market opened, pre-market Nio shares rose 28.8% and climbed to $5 again.
In fact, according to the text released by both the Hefei government and Nio, neither party has officially disclosed their investment or financing plans.
Nio's statement was: "Earlier in the day, at the Nio House (NIO House) located in the JAC Nio advanced manufacturing base, Nio and the Hefei Municipal Government signed a framework agreement for the Nio China headquarters to settle in Hefei."
The official Weibo of the Hefei People's Government Office wrote:
Eight projects, including the Nio China headquarters project, were signed in the cloud, with a total investment of 102 billion yuan.
The Jianghuai Nio EC6 mass production project is also launched simultaneously ... The Nio China headquarters project includes the establishment of the Nio China headquarters in Hefei, the establishment of R & D, sales, and production bases, and the establishment of a China headquarters operating system centered on Hefei.
Although this time is only a "cooperation framework agreement" and there is no more sufficient information, it is widely believed that Nio has been endorsed by the provincial and municipal governments in Anhui Province and will at least receive financing support from Hefei.
Later in the evening, Li Bin also revealed in an interview with the media that "the government will definitely participate and organize investment", but "this is still a framework agreement, and the specific agreement process is currently being implemented."
However, it is interesting that Hefei actually released two versions of information. The previous version is more detailed and may reveal the current progress of the negotiations between the two parties.
The first edition wrote:
The project plans to finance 14.5 billion yuan for the company's R&D, market system establishment and operation; at the same time, it plans to build a headquarters and R&D base (1 billion yuan) and a second production base (1.5 billion yuan).
Nio China expects revenue of 14.8 billion yuan in 2020 (listed 3 models), 120 billion yuan in 2024 (listed 6-8 models), total revenue of 420 billion yuan from 2020 to 2025, and total tax revenue of 7.8 billion yuan, listed on the "SSE Star Market" (Sci-Tech innovAtion boaRd) by 2025.
In the second edition, the above paragraphs were deleted, and it was simply referred to as "planning to raise more than 10 billion yuan for the project."
According to Li Bin: "The formal negotiations between the two sides began after New Year's Day and before the Spring Festival, that is, in January. After the Spring Festival in the middle, and the epidemic prevention work, it took more than a month. This speed really made me look good."
In fact, after the new coronavirus epidemic, local governments need to find new driving points for economic growth, and Nio is also facing financial pressure, and the two sides will have a basis for "hitting it together."
Sorting out the "points" deleted in Hefei-although these points have not been confirmed but considering that they will not be written unilaterally-it is easy to find that the financing of Nio is essentially a "high performance gambling" equity Financing.
First, the cooperation between Nio and Hefei is that Nio establishes "Nio China Headquarters" to inject Chinese assets and business into this new entity, and then finances through this new entity. Nio will only account for a portion of China's business.
In other words, Nio China is equivalent to a "joint venture" in China, which sells part of the Chinese market's revenue in exchange for local government investment-considering that Nio currently only has revenue in the Chinese market, it can be simply understood that Nio is Shares for money.
Secondly, the financing amount of the Nio China headquarters project was 14.5 billion, and the agreement also mentioned "Nio China's 2020 revenue of 14.8 billion", which is equivalent to saying that Nio's financing amount was matched with reference to this year's income.
This is the first-level goal of performance gambling. The second and third tiers are: "Nio's China revenue will reach 120 billion yuan in 4 years, including 6-8 models listed; total revenue in 5 years will reach 420 billion yuan, and total tax revenue will be 7.8 billion yuan."
According to these three "agreed goals", this year's 14.8 billion revenue target is equivalent to the need to achieve 40,000 sales tasks, which is double the total sales of 20,500 vehicles in 2019.
From the current progress of Nio, as long as the cash flow problem is solved, large-scale batch delivery can be achieved, and certain promotional actions can be achieved.
The second layer of โ120 billion in 2024โ currently seems to be the most challenging goal, because if 2024 to 100 billion in revenue can be achieved, then the total revenue of 450 billion in the third layer is not difficult.
However, to achieve 100 billion yuan in revenue in four years, it is basically an annual increase of 68%. One reference is that currently only a few of Geely, Great Wall, SAIC-GM-Wuling, etc., have sales of over 100 billion in Chinese brand car companies.
Or to make it simpler, it is estimated that the growth in the first three years has doubled, and the next two years have been completed at 50% and 25%, that is: 15 billion in 2020, 30 billion in 2021, 60 billion in 2022, 90 billion in 2023, and 1200 in 2024. Billion.
According to the above calculation method, Nio can happen to reach the goal of 420 billion in total revenue by 2025.
In addition, according to 100 billion revenue estimates, even if Nio's average bicycle price can reach about 300,000 yuan, it will still require more than 400,000 vehicles.
From the perspective of luxury brands, the sales of BMW, Mercedes and Audi in 2019 will be around 700,000, while Lexus and Cadillac, which have the second largest sales volume, will only be 200,000.
There is no doubt that Nio's marketing goals in order to get these 14.5 billion investments are quite aggressive, and its courage is commendable.
Another curious place is, if Hefei gives this 14.5 billion, how much equity will it get?
Based on the current market value of RMB 37 billion of Nio, this financing can account for at least 40% of the equity of the new company, and it is easy to obtain a controlling stake. It is estimated that Nio is unwilling to surrender such large gains and risks.
To put it another way, the two parties use the annual income in 2020 to measure the financing amount. At present, Nio is 5 times the sales ratio, so this investment is equivalent to about 20% of the market value in 2020.
Therefore, this time Hefei will require at least more than 20% equity, and the forecast is estimated to be about 25% to 30%.
In fact, although the local government can send charcoal in the snow, it must not be delivered to the account at one time, and it is often "no rabbits and no eagles".
If we look at the scale of 10 billion yuan in financing, the content of the negotiations between the two sides basically continues the previous 10 billion investment agreement reached between Nio and Beijing Yizhuang SDIC.
The main content of the previous Yizhuang agreement was: "Nio will set up a new entity 'Nio China' in the Beijing Economic and Technological Development Zone, and Yizhuang SDIC will use its designated investment company or joint other investors to cash in 'Nio China' Invested RMB 10 billion to acquire the non-controlling shareholders' equity in 'Nio China'.
Yizhuang SDIC will also assist 'Nio China' in the construction or introduction of third parties to jointly build Nio China 's advanced manufacturing base and produce the company's second-generation platform models.โ
However, a careful comparison of the "Hefei Agreement (First Edition)" and the Yizhuang Agreement clearly shows the difference:
First, the Hefei agreement is much more detailed, and even expected the revenue plan for the next five years;
Second, the amount of investment in the Hefei agreement has increased significantly, but the concept of "cash investment" has not been mentioned, and "non-controlling shareholders' equity" has not been discussed;
Third, Hefei has clarified the amount of headquarter investment and new plant investment.
Obviously, the first aspect of Hefei requires Nio to put the entire R & D and manufacturing system in Hefei. This is an important link to promote industrial upgrading and local employment. Although the entire financing is more than Yizhuang, at least 2.5 billion yuan must be used locally.
The second is that without the reference of "cash financing", it is likely that some other methods will also be used, such as the allocation of factories, the allocation of JAC earnings, and so on.
Especially for the latter, JAC is now the founder of Nio, and the cash flow it has occupied has greatly limited the expansion of Nio's sales. So early financing is likely to use some form of loan to solve Nio's current funding chain crisis.
In addition, since "Nio China" will be a new entity, or a "joint venture" between Nio and the local government of Hefei, considering that Anhui automobile companies not only have JAC, but also Chery, the old independent leader, the local government will definitely ask the board of directors Candidates make new arrangements so that the entire management will not be Nio's current shift.
Among them, it's likely that Nio China's chairman will no longer be Li Bin.
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