Weekly Electric Vehicle News: Nio’s $2.2B Deal and Potential US Tariffs

Summary

  • This week, electric vehicle maker Nio Inc. (NYSE:) has announced an investment deal worth $2.2B with Abu Dhabi-based CYVN Holdings. This will raise CYVN’s stake in Nio to 20.1%.
  • Mullen Automotive Inc (NASDAQ:) executed another reverse stock split, its third in the year, to meet Nasdaq’s minimum bid price requirement.
  • The U.S. government is evaluating an increase in tariffs on certain Chinese goods, including electric vehicles, which could impact global car manufacturers like Tesla, Inc. (NASDAQ:)

Recapping the week’s biggest headlines for the electric vehicle industry, we saw substantial developments. Nio Inc. garnered a $2.2B investment from CYVN Holdings and Mullen Automotive executed its third reverse stock split. Finally, the idea of increased tariffs for Chinese-made electric vehicles is being considered by the U.S. government.

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Investment Boost for Nio

China-based Nio Inc. (NYSE:), an electric vehicle manufacturer, announced earlier this week an investment deal worth $2.2 billion with Abu Dhabi’s holder CYVN. This pact is poised to enhance CYVN’s stake in NIO, making it the largest individual shareholder with a boost to 20.1%.

This deal provides reassurance to investors given that CYVN’s share ownership doesn’t impact CEO William Li’s control over the company owing to his Class ‘C’ ordinary shares.

An increase in representation on the Company’s board is part of the deal, allowing CYVN to nominate two directors conditional on a sustained beneficial ownership of at least 15% of the Company’s share capital.

Analysts from Deutsche Bank emphasize that this deal removes a near-term overhang around capital runway. Previously, projections showed Nio burning 11 to 15 billion RMB in 2024, but the recent deal between Nio and CYVN mitigates such closures issues, extending expected financial stability until 2025.

Nio’s shares ended the week on a positive note, increasing by 0.94% after reaching a weekly peak of $8.87/sh on Tuesday.

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Third Reverse Split for Mullen

Mullen Automotive Inc (NASDAQ:) based in Michigan, executed a 1-for-100 reverse stock split this week, supported by shareholders during a special meeting on December 18th.

The primary aim of the Reverse Stock Split is to secure the Company’s compliance with Nasdaq’s minimum share bid price of $1.00, requisite for maintaining its exchange listing.

For MULN to regain compliance with Nasdaq’s listing norms, a sustained stock price closing at or above $1 for at least 20 consecutive business days by January 22, 2024, is needed. Should MULN fail to meet these conditions, there are chances that the company’s stock gets delisted from the Nasdaq exchange.

Even though the third reverse split was implemented this year, there is no guarantee that the shares will remain above the threshold. Concerns rise for Mullen’s stocks with fears about moving to the OTC market which could be tougher due to less liquidity and harder to secure funding. The shares of MULN ended the week down 29.46% at $9.84/sh.

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Possibility of Increased Tariffs

This week, rumors emerged about the US government mulling over increasing tariffs on some Chinese goods including electric vehicles. Currently, Chinese vehicles entering the U.S. are subject to a 25% tariff which was implemented during former President Donald Trump’s administration.

The Biden administration is reevaluating Trump-administration tariffs on Chinese goods worth up to $300 billion, with a review completion date set for early 2024. This could mean a tariff reduction on certain imported Chinese goods that are not deemed strategically crucial. On the other hand, tariffs on clean-energy products could be increased.

Such tariff changes could significantly impact global car manufacturers like Tesla Inc (NASDAQ:) which relies heavily on exporting from China for their business.

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The potential changes in tariffs could impose a significant impact on the trading of assets related to electric vehicles. Forex traders should closely track the trends in the electric vehicle market that might lead to volatility in the currency pairs associated with the United States and China.

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