Nio took a Hefei state rescue in 2020 and flipped from collapse to a rally

Through 2019 Nio, the Chinese electric carmaker often called 'the Tesla of China', was running low on cash, with its shares trading at roughly $1.39 and investors pricing in bankruptcy. It had burned through money building cars and was being abandoned by public markets.

In February 2020 Nio signed framework agreements with Hefei's city government for a fundraise of more than 10 billion yuan, about US$1.42 billion, and to set up a new headquarters and manufacturing base. The shares jumped as much as 35% on the news.

The Hefei investors' money was critical. In April 2020 a state-backed consortium in Hefei injected about 7 billion yuan, or roughly $1 billion, into Nio's China operations, restoring confidence and giving it cash to keep producing. In the months that followed Nio cut costs, restructured and ramped deliveries.

The result was a spectacular recovery: Nio's stock rose more than 1,000% from its March 2020 low as deliveries grew and investors re-rated the company, even as its share count was diluted by the rescue financing.

After Hefei investors put in about $1B in early 2020, Nio's stock rose over 1,000% from its March low and deliveries recovered.

Without the Hefei cash Nio would not have had the money to keep building and selling cars.

The state-backed rescue signalled that the local government wanted Nio to survive, steadying investors.

It gave between cash and a new China headquarters, which cut costs and shortened the supply chain.

The rescue was dilutive, but being diluted beats being bankrupt for shareholders.

When you are out of cash, taking a government-linked rescue can buy the runway to finish the product and survive.

Nio survived 2020 and became one of China's leading EV brands, with deliveries climbing and its market value soaring through 2020 and 2021. The rescue, though it gave Hefei a large stake, bought the company the capital and credibility to compete with Tesla in its home market.