Liquidity and security over yield deliver investment benefits to NIO

The challenge

Like many start-ups, NIO has faced cash investment challenges, evolving as it has moved through different phases of its business life cycle. It has experienced rapid growth, combined with a torrent of investment capital, which created vast cash management challenges. NIO has a high cash burn rate due to the high cost of research and development. In addition, NIO’s treasury department needed security for its cash, USD liquidity across time-zones and above all, to avoid loss of capital.

As NIO has thrived, continuing to fundraise and grow, its domestic business has become a thriving source of RMB cash, but this comes with challenges, together with an ultra-low yield environment in many parts of the world and China’s imminent new Asset Management Product (AMP) rules led to a reassessment of its liquidity management.

The solution

NIO chose to partner with J.P. Morgan Global Liquidity (JPM GL) after its 2018 initial public offering. JPM GL’s USD liquidity solution satisfied NIO’s low risk tolerance,need for timely access to dollars and, importantly, its desire for security.

Choosing JPM GL also meant 24/7 cross-market operational efficiency. NIO’s treasurers in China can quickly manage settlement of capital raised regardless of time zones or business hours. The financial institution also helped NIO’s treasury team enhance its governance, ensuring its liquidity management fulfilled both its own business objectives and US share listing requirements.

Ready cash and secure reserves remain mission critical to NIO. To achieve these at the same time as new AMP rules were about to go into effect required proactivity. With JPM GL’s help, NIO reassessed its cash investment approach early, understood the consequences of the new rules, and adopted two RMB liquidity solutions - one catering to multinational corporations and the other to local companies, both of which invest in high quality issuers. By using the combination, NIO maximised its cash investment return opportunities.

NIO also benefitted from JPM GL’s Morgan Money, a multi-currency, 24/7 trading and risk management platform.

Best practice and innovation

Achieving prudent yield enhancement while meeting liquidity and security requirements are global best practices, particularly relevant in China in 2021 as corporations must revisit their cash investment approaches before the new AMP rules come into effect.

“Our segmented cash solution allows us
to invest aligned with our values, which include liquidity and security over yield,”
says Sasa Wang, Director, Treasury, NIO.

Given NIO’s current stage in the business life cycle, it was looking for prudent, market-competitive return opportunities for some of its domestically generated cash. Yet meeting its newly broadened appetite for returns proved challenging at a time of ultra-low rates.

Cash segmentation and adopting two different money market strategies (both subject to stringent credit quality frameworks) have positioned NIO to meet these needs. The RMB liquidity solutions that NIO has adopted offer an effective means for China's corporations, all of which are facing a new cash investment market landscape. 

By investing in high quality institutional money market solutions in their overall portfolios, they can achieve diversification, especially important when China’s new regulations are phasing out principle-guaranteed products.

“Morgan Money demonstrates innovation as a trading and risk management platform operating across currencies, offering operational efficiency and effective controls, securely and across time zones,” says Wang.

Key benefits

• Security.
• Liquidity.
• Ease of operation and round-the-clock, high quality client services.
• Multi-currency capabilities.
• Enhanced yield opportunities.

NIO’s cash investment management approach is a good reference point for other fast-growing, homegrown companies in China facing evolving cash needs as they transition through different stages of their business lifecycle. “Bringing our history, global scope and experience, we also share our industry know-how and partnership with NIO’s treasury team to develop its expertise,” says J.P. Morgan Global Liquidity.

NIO Inc. is a pioneer in China’s premium electric vehicle market. The company designs, jointly manufactures and sells smart and connected premium electric vehicles, driving innovations in next generation technologies in connectivity, autonomous driving and artificial intelligence.