Nio Inc. is one of China's best-known electric car makers and Tesla Inc.'s main competitor in the Chinese market.
Recently, NIO announced that it will receive a $740 million investment from CYVN Holdings, backed by the Abu Dhabi government. The investment will give CYVN Holdings a 7 percent stake in NIO.
This is surprising news as Abu Dhabi is one of the world's largest oil exporters and electric vehicles are seen as a threat to the oil industry. Why would the Abu Dhabi government be interested in Chinese EV manufacturers?
There are two possible causes. The first reason is that the Abu Dhabi government is looking to diversify its economy and reduce its dependence on oil. Investing in electric vehicles is a future-proof initiative and an opportunity to demonstrate its environmental awareness and innovative capabilities.
The second reason is that the Abu Dhabi government may be bullish on the potential and growth of China's electric vehicle market. China is the world's largest car market and the largest market for electric vehicles.
With the Chinese government's push for new energy vehicles and consumers' increased demand for eco-friendly and smart vehicles, China's electric vehicle market is expected to continue to maintain rapid growth.
As a leader in China's electric vehicle market, NIO has strong technical strength and brand influence. NIO currently has four high-end electric SUVs on sale, namely the ES8, ES6, EC6 and ET7. NIO also offers innovative services such as battery replacement, smart charging piles and driverless technology.
NIO delivered 20,400 electric vehicles in the first quarter of 2023, up 423% year-on-year. NIO achieved revenue of RMB10.7 billion in the first quarter of 2023, up 77% year-on-year.
Although NIO still lost RMB450 million in the first quarter of 2023, it has significantly reduced the size of the loss compared to RMB1.69 billion in the same period of 2022.
The US$740 million investment endorsed by the Abu Dhabi government will provide NIO with more financial support to expand production capacity, improve its technical level, increase market share, enhance its brand image, and further narrow the gap with Tesla.
Tesla is the world's largest maker of electric cars and NIO's biggest competitor. Tesla has a high reputation and loyalty in the Chinese market, as well as advanced technology and innovation capabilities.
Tesla delivered 184,000 electric vehicles in the first quarter of 2023, a year-on-year increase of 109%. Tesla achieved revenue of $10.39 billion in the first quarter of 2023, up 28% year-over-year. Tesla achieved a net profit of $438 million in the first quarter of 2023, up 27% year-over-year.
The competition between Tesla and NIO is not only reflected in products and services, but also in the capital market. Tesla's current market cap is about $600 billion, while NIO's market cap is about $70 billion. The gap between the two is still large, but NIO has a faster growth rate and a higher valuation multiple.
The US$740 million investment endorsed by the Abu Dhabi government is undoubtedly an affirmation and encouragement to NIO, as well as a challenge and warning to Tesla.
Can NIO use this investment to further enhance its position in the Chinese and global electric vehicle market? Will Tesla be able to maintain its lead in electric vehicles? These issues deserve our attention and consideration.