Chinas Nio has held exploratory talks with Mercedes-Benz for a tie-up that would see the German automaker invest in the Chinese electric vehicle startup in exchange for technology, two people with direct knowledge of the matter said. The talks were held last month at Nio’s headquarters in Shanghai. One of the people said that Nio’s founder and chief executive, William Li, discussed the potential collaboration with Mercedes CEO Ola Kaellenius.
The Mercedes-Nio tie-up would provide an infusion of cash for Nio, struggling to ramp up production amid a massive investment blitz and declining sales. The company needs a new production line to avoid a debt default that could derail its long-term ambitions. Its investors include the investment arm of Chinese tech giant Tencent Holding Co, but it needs more funds to meet its cash burn.
EV startups are seeking tie-ups and investments from established automakers as they compete with each other in the fast-growing sector. Elon Musk, the CEO of Tesla, credited a $50 million investment from the Mercedes group with saving the EV industry leader in 2009. But many such deals have been difficult to seal, and analysts say that the Nio-Mercedes talks will likely yield results for a while.
Mercedes has a patchy record in China, where it ranks ninth among producers of electric cars, but is planning to invest more to expand its R&D team and accelerate innovations in electrification and digitalization. It is also doubling down on investments in self-developed technologies for critical components such as batteries and chips. The resistance at Mercedes to a tech alliance with a Chinese upstart like Nio may reflect friction still at play in the legacy automakers’ adjustment to the EV shift.
Ahead of a planned public listing, Nio has been seeking to strengthen its balance sheet by reducing its liabilities and raising fresh capital. It has also begun to sell its stake in a carmaking factory, a move that will reduce its losses and free up cash to invest in the development of future models.
Nio has a reputation as an EV maker that can develop and produce luxury vehicles with its technology. Its battery-swapping system allows drivers to swap their cars’ power cells on the go, and the firm claims it has more than 1200 patents in the field.
But rumors have swirled in recent months that the firm is on the verge of collapse, and in February, Nio lost a significant investor when Hong Kong-based private equity fund Hillhouse Capital unloaded its entire stake. The loss of capital further exacerbates Nio’s financial woes, and it is also facing increasing competition in the home market from Chinese rivals such as Byton and Xpeng. Its shares have been volatile this year as the company seeks a turnaround. Nio’s stock was up 1.9 percent on Monday. It has lost more than half its value this year. It is battling for survival against a weakening global economy and rising trade tensions.
