GIC sues China EV maker Nio, top execs for allegedly inflating revenues of at least US$600 million
It’s accusing Nio of fraud via manipulation of battery ‘sales’; seeks damages for its purchase of 54 million Nio depositary shares
[SINGAPORE] The Republic’s sovereign wealth fund GIC has filed a lawsuit against China electric vehicle (EV) manufacturer Nio , its current chairman and CEO Li Bin (also known as William Li) and former chief financial officer Feng Wei, according to court documents seen by The Business Times on Thursday (Oct 16).
GIC is claiming damages sustained from its purchase of 54,458,148 Nio American depository shares (ADSs) during the period from Aug 11, 2020, to Jul 11, 2022, at prices “that were inflated artificially by defendants’ fraud in reliance on the misrepresentations alleged herein and/or on the integrity of the market for Nio ADSs”.
The suit’s key allegation is that Nio unlawfully recognised immediate revenue of more than US$600 million from a battery asset and leasing joint venture – Weineng Battery Asset (Weineng) – which was actually controlled by Nio and which it failed to disclose.
“Weineng’s chief purpose was to “take over’ Nio’s battery subscription business and allow Nio to unlawfully pull forward the revenue from the leased batteries immediately,” it said.
“In fact, every facet of Weineng’s business was designed by Nio to serve Nio, and the entity itself was owned and controlled by Nio, and several of its cronies, to ensure it would only further Nio’s interests.”
The complaint also details 14 times the company delivered materially false and misleading statements, including in its financial results, prospectuses and disclosures from August 2020 to June 2022, in relation to the above fraud.
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GIC declined to comment on the matter. Nio did not immediately reply to BT’s requests for comment.
The suit was filed in the US District Courts, New York Southern District, in August by Kirby McInerney on behalf of GIC, who is demanding a jury trial.
Weineng’s “abysmal” liability ratio
Nio, established in 2014 by Li, specialises in the manufacture of EVs with its own battery-swap system. This allows the electrical energy in the cars to be replenished much faster than conventional plug-in charging.
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The company made its initial public offering on the New York Stock Exchange in 2018, raising US$1 billion. It was listed on both the Singapore Exchange’s mainboard and the Hong Kong Stock Exchange in 2022.
Unlike other EV brands, it offers consumers the option to purchase its cars without the batteries, allowing for the price to be lower since batteries account for up to 40 per cent of the price of an EV. It then leases batteries to the customers.
This business model is “very capital intensive”, as more batteries than cars need to be on hand for swaps, EV batteries last only five to six and a half years, and necessitate a network of automated battery swap stations.
Noting that other carmakers – including Tesla – tried and failed at such efforts, the suit detailed that Nio ran into serious trouble by its 2019 financial year with negative net income of US$1.6 billion, despite a US$1 billion capital injection from a Chinese provincial government and sales of convertible bonds.
In 2020, Nio formed Weineng as an ostensibly independent joint venture with battery giant Contemporary Amperex Technology Co, and Chinese investment companies Hubei Science Technology Investment Group and Guotai Junan International, with each entity holding 25 per cent.
Weineng bought over Nio’s batteries and its battery leasing and services.
As a result, Nio’s “financials dramatically improved and its revenues skyrocketed”, with revenue more than doubling to 6.6 billion yuan (S$1.2 billion) in the fourth quarter of 2020.
Revenue in FY2021 was 26.1 billion yuan, up from 16.3 billion in FY2020. GIC said that Nio recognised more than 4.1 billion yuan – around US$600 million – from Weineng in FY2021 alone.
It also contended that the split of voting/equity interest in Weineng was “meaningless” as Nio’s economic interest in the venture was always “disproportionately greater” than the others.
This, the suit alleges, violates generally acceptable accounting principles because Nio actually held a controlling financial interest in Weineng and was its primary beneficiary. It argues that Nio should have disclosed Weineng as a variable interest entity and consolidated its financial results with Nio’s.
It also posits that all of Weineng’s activities involved or were conducted on behalf of Nio since Nio controlled all of the operations by installing senior managers to oversee the company. At one point Nio owned as much as 55 per cent of the company, since in addition to its equity interest, Nio was also owed 1.5 billion yuan by Weineng.
The revenue from Weineng was also “not likely collectible”, as it had an “abysmal” asset-to-liability ratio of 0.36 on Dec 31, 2021. Moreover, its ability to secure funding “was far from certain”.
Nio fends off Grizzly
On Jun 28, 2022, Grizzly Research released a report detailing the battery revenue that was pulled forward from Weineng, which the company denied but did not provide a “substantive rebuttal” to.
In July 2022, it unexpectedly convened an independent committee – consisting of independent directors Denny Lee, Wu Hai, and Long Yu, to investigate the report’s allegations.
Nio shares fell nearly 9 per cent to US$20.57 on Jul 11 after the news, with a US$2.6 billion loss in market capitalisation.
GIC said that the investigation was “tainted from the start”, as its members had “pre-existing and close personal relationships with Defendant Li”.
Wu served as an executive director of China at Temasek Holdings Advisors (Beijing) prior to joining Nio’s board in 2016. During his stint at Temasek, the company was the lead investor in Nio, helping it raise US$316 million in July 2016.
Li and Long both sit on the board of Shenzhen Zhiling Technology, whose “actual controller” is Li, and Li registered a Nio car for Long’s 11-year-old daughter in June 2017.
GIC noted that after Nio’s announcement on Aug 26, 2022, that the investigation was “substantially complete”, the EV manufacturer had not since announced its completion.
In September that year, the United States Securities and Exchange Commission (SEC) requested more information regarding whether Weineng was, in Nio’s analysis, a variable interest entity of the company.
GIC pointed out that in an October response to SEC, Nio did not mention the fact that it was owed 1.5 billion yuan by Weineng: “In sum, Nio did not provide the SEC with the full story, omitting that Nio was the only Weineng investor with an entire segment of its business dependent on Weineng.” GIC also noted that SEC had yet to take further action against Nio.
Like other China carmakers, Nio is expanding into the Asia-Pacific region. It will make its South-east Asia debut in 2026 in Singapore, partnering Wearnes Automotive as distributor and dealer.
Nio has not posted a profit since its establishment in 2014.
In its last reported results, for the second quarter of 2025, Nio’s revenue was up 9 per cent year on year to 19 billion yuan, with its net loss reduced 1 per cent to five billion yuan. Its vehicle deliveries increased 25.6 per cent to 72,056 vehicles.
As at 12:22pm, Nio shares traded 4.2 per cent down or US$0.29 to US$6.67 on SGX.
Nio’s NYSE share price has seen a general decline from a peak of US$61.95 on Jan 22, 2021. As at Oct 15, the group’s shares closed at US$6.82, up some 50 per cent this year
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