Abu Dhabi's CYVN Holdings takes 7% stake in Chinese EV start-up Nio for $739m

CYVN Holdings, an investment entity backed by Abu Dhabi, has signed an agreement to take a 7 per cent stake in Chinese electric car maker Nio.

The investment company has agreed to buy about 85 million newly issued Class A shares for $738.5 million in cash, or $8.72 a share, Nio said in a statement on Tuesday.

CYVN, which will gain a seat on Nio’s board following the acquisition, is buying about 40 million shares from a subsidiary of Chinese internet company Tencent Holding to achieve the 7 per cent stake.

“Our strategic investments in Nio are driven by our appreciation of its leading brand, innovative and premium products, and proven technological capabilities in the smart electric vehicle market,” said Jassem Al Zaabi, chairman and managing director of CYVN Holdings.

“We are excited to develop strategic partnerships with Nio and are fully committed to providing strategic value that will support Nio’s international business growth.”

Founded in 2014, Shanghai-based Nio develops and manufactures premium smart electric vehicles.

The company’s total revenue rose to $1.55 billion in the first quarter of the year, up 7.7 per cent from the same period a year earlier.

Nio’s vehicle sales stood at $1.34 billion in the first quarter, slightly lower from the same quarter a year ago.

Nio's NYSE-listed shares closed nearly 2 per cent lower at $9.35 on Tuesday.

“The strategic investments from CYVN Holdings demonstrate Nio’s unique values in the smart electric vehicle industry,” said William Bin Li, founder, chairman and chief executive of Nio.

“The investment transaction will further strengthen our balance sheet to power our continuous endeavours in accelerating business growth, driving technological innovations and building long-term competitiveness.”

Nio and CYVN Holdings have also agreed to jointly pursue opportunities in the electric car maker’s international business following the closing of the deal, which is expected to take place in early July.

China, the world’s second-largest economy and top manufacturing centre, accounted for 60 per cent of global electric car sales in 2022, according to the International Energy Agency.

Electric car sales are set to surge by 35 per cent this year around the world, helped by government subsidies and the tightening of carbon dioxide emissions standards, the agency said in its Global Electric Vehicle Outlook in April.

Electric car sales are projected to hit 14 million in 2023, up from 10 million last year, the Paris-based agency said.

Meanwhile, the share of electric cars in the overall market will rise to 18 per cent this year, from 14 per cent in 2022, the agency said.

The EV market continues to grow amid a global shift towards energy conservation, with car makers' consumer and commercial divisions tapping into the technology's potential.

It is expected that EVs will account for half of global car sales by 2035 and hit about 73 million units by 2040, from two million in 2020, a study by Goldman Sachs showed in February.

During that time, the percentage of EVs in global car sales is projected to rise to 61 per cent, from 2 per cent.

The sector's market value is projected to hit more than $1.1 trillion by 2023, from about $209 billion in 2022, according to Precedence Research.

Despite the rising demand, the industry faces several challenges, including high raw material costs, supply chain issues and the concentration of manufacturing in a few countries.

Global EV sales grew by only 3 per cent in January, one of the “most dramatic collapses” in monthly sales as the removal or reduction of government incentives hit consumer sentiment, a Rystad Energy report said in March.

About 672,000 EVs were sold in January, about half the number of sales recorded a month earlier, the Norway-based energy consultancy said.