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The NIO ES8, all-electric full-size sport utility vehicle is displayed in front of the New York Stock Exchange (NYSE) to celebrate the company's initial public offering (IPO) in New York, U.S., September 12, 2018.
Reuters/Brendan McDermid
Full speed.
HEDGE OR HEADACHE

Tesla’s biggest outside shareholder has invested in a Chinese Tesla rival

By Echo Huang

NIO, a Shanghai-based EV maker that went public on the New York Stock Exchange in September, just attracted half a billion dollars (paywall) from the Scottish investment firm that is Tesla’s biggest shareholder after Elon Musk. According to a regulatory filing posted on Tuesday (Oct. 9), Baille Gifford, which has a roughly $ 4 billion stake (paywall) in the California EV maker—now owns 11.4% shares of NIO.

The four-year-old Chinese EV maker, which had a lackluster IPO, saw its share price close up 4.9% that day.

On the face of it, Baillie Gifford’s investment looks like a hedge against its 7.7% stake (paywall) in Tesla, which has been facing turmoil at home. That includes losing Elon Musk as its chairman as a result of a settlement with the US Securities and Exchange Commission over Musk’s bizarre tweets in August about taking the company private, as well as an exodus of executives.

When it comes to China, the world’s largest EV market, Tesla is in the process of securing a land for a factory in Shanghai, according to Bloomberg (paywall), but its production plans are still full of uncertainty. In the meantime, while Tesla is among the 10 top EV sellers (link in Chinese) in China, the current trade war has led to increased tariffs on cars imported from the US, which isn’t likely to help sales.

Chinese automaker NIO has its own problems. It doesn’t have its own production plant, like a lot of the other hot EV startups in China. As a result, NIO has had to team up with a state-run firm to get its cars built. It’s also struggling to catch up on delivery—while its founder Li Bin had claimed the company could ramp up quickly to 10,000 cars this year, it only fulfilled 481 orders as of August. Along the way, it’s posted losses in the hundreds of millions of dollars, according to its IPO filing. NIO didn’t immediately respond to a request for comment on the current status of deliveries.

Rather than a hedge, Tesla and NIO could be equal headaches for a big investor right now.

The century-old UK fund manager, though, likes to take the long view. In an interview (video) in the midst of the Tesla tweet troubles, Baillie Gifford senior partner James Anderson said while there’s never 100% certainty about any investment, it remains optimistic based on what it expects the future to look like:

Whether you talk about the progress of the underlying technologies in electric vehicles from the batteries to solar energy, which is obviously in the background of this, both for Tesla specifically and in general. Whether you talk about the industry developments, which we think are showing signs of being for a very long number of years set up to move absolutely in favor of electric vehicles, or whether you think about the specific achievement of Tesla, the underlying economic developments… seem to us as encouraging as some of the noises are discouraging.