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Tencent-backed China electric car maker NIO seeks US$1.3b in US IPO

[TOKYO] NIO Inc, the Chinese electric car maker backed by technology giant Tencent Holdings, is seeking as much as US$1.3 billion in its planned US initial public offering as it gears up to take on the likes of Tesla Inc.

The company is offering 160 million American depositary shares at US$6.25 to US$8.25 each, according to a regulatory filing on Tuesday in the US. Shares are expected to price on Sept 11 following a roadshow that starts on Wednesday in Hong Kong, according to terms for the deal obtained by Bloomberg.

NIO is among Chinese electric-car companies raising money to fund aggressive product development and expansion amid the auto industry's seismic shift toward alternative-power and autonomous vehicles. China's government is also pushing to increase the use of battery-powered cars to cut pollution and reduce dependence on imported oil, spawning a clutch of startups in the nation aiming to take on Tesla and legacy carmakers.

NIO plans to use proceeds from the offering for research and development, sales and marketing, and building manufacturing facilities and the supply chain, the company said in the filing.

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CONCENTRATED POWER

The offering has been structured to ensure voting rights remain concentrated with founder William Li and Tencent. After the IPO, Li will own 14.5 per cent of the electric-car maker and have 48.3 per cent of the voting power through Class C shares. The Class B stock owned by Tencent and related entities after the offering will represent 12.9 per cent of NIO and 21.5 per cent of the voting power, according to the prospectus.

As much as 5 per cent of the ADS, each representing one Class A share, has been reserved for directors, officers, employees and other individuals associated with company, it said. Including an overallotment option, the IPO could raise as much as US$1.5 billion.

After meeting investors in Hong Kong on Wednesday and Thursday, the NIO management will be in Singapore on Friday, according to the deal terms. The roadshow will continue next month in London and the US.

NIO's move for the US listing comes amid Tesla's plan to set up a gigafactory in Shanghai. NIO, formerly known as NextEV, is among several startups to have sprouted in China after the government introduced incentives.

In January, Byton, a Nanjing-based company started by former BMW AG executives, became the first Chinese automaker to hold a large-scale unveiling at the Consumer Electronics Show in Las Vegas. Others like WM Motor Technology Co. and XPeng Motors, backed by funding from Alibaba Group Holding, are also developing new models.

FIRST VEHICLE

NIO's founder Li, also known as Li Bin, plans to transfer 50 million shares, accounting for about one-third of stock he owns in the company, to a trust at an "appropriate time in the future," he said in a letter included in the prospectus. Mr Li will retain voting rights to the stock, while NIO users will discuss and propose how to use "economic benefits from these shares, through certain mechanisms to be implemented in the future," he said.

NIO began selling its first vehicle, the ES8 sport utility vehicle, in December, about three years after the company was founded, and deliveries started on June 28 this year. The vehicle is priced at 448,000 yuan ($66,000) before subsidies.

As of Aug 28, NIO had delivered more than 1,300 ES8s and had reservations for another 15,700 more, according to the prospectus. The company plans to begin selling another electric SUV, the ES6, by the end of 2018, with initial deliveries in the first half of 2019.

Morgan Stanley, Goldman Sachs Group and JP Morgan Chase & Co are arranging the offering, along with Bank of America Corp, Deutsche Bank, Citigroup, Credit Suisse Group, UBS Group and Wolfe Capital.

BLOOMBERG