What's happening
Shares of Chinese electric-vehicle maker NIO (NIO 3.49%) were up sharply on Tuesday morning on news that the company has secured an agreement to build cars with self-driving systems developed by Intel (INTC 0.64%) subsidiary Mobileye.
As of 11 a.m. EST, NIO's American depositary shares were up about 26% from Monday's closing price.
NIO began mass-producing its upscale electric SUVs last year. Image source: NIO.
So what
NIO's deal with Mobileye has two parts:
- NIO will integrate Mobileye's Level 4 self-driving system into upcoming models for consumer markets in China and "other major territories."
- NIO will also work with Mobileye to develop and build a self-driving taxi that will be used exclusively by a Mobileye-owned "robotaxi" ride-sharing service. The taxi will be based on NIO's next-generation electric vehicle.
NIO investors clearly hope that this deal represents a financial lifeline for the struggling company. After heavy spending in the second quarter, the company found itself in acute danger of running out of cash. Investor concerns grew after a hoped-for financing deal reportedly collapsed. A second deal, involving the sale of convertible securities to NIO's CEO and a key investor, appears to be on hold.
Now what
As of this writing, we don't know the terms of the deal -- specifically, we don't know how much money NIO will receive or when it will arrive. That Mobileye, which has long-established relationships with most of the world's global automakers, chose NIO to make its robotaxis suggests that it got very favorable terms -- meaning that this might not be a financial bonanza for NIO when all is said and done.
Long story short: This looks like good news for NIO investors, but whether it will be enough to keep the company going remains to be seen.
