What's happening

Shares of Chinese electric-car maker NIO (NYSE:NIO) were sharply higher on Wednesday morning after a Chinese business-news outlet reported that the cash-strapped company had secured new financing from a major automaker. As of 12 p.m. EST, NIO's American depositary shares (ADS) were up about 16% from Tuesday's closing price.

So what

According to a report from Chinese business-news site Sina Finance that cites a person familiar with the matter, NIO will soon receive a cash infusion of about $1 billion from Guangzhou-based GAC Group (OTC:GNZUF). (At press time, neither NIO nor GAC had confirmed -- or denied -- the report.)

A red NIO ES6, a sleek midsize crossover SUV.

NIO's best-seller is the ES6, an upscale five-passenger electric SUV. Image source: NIO, Inc.

GAC is one of China's big domestic automakers. It has significant joint ventures with Honda Motor and Fiat Chrysler Automobiles, among others. If GAC has in fact decided to make a major investment in NIO -- and as of now, neither company has confirmed the report -- then NIO's future is bright. 

That's an important development. In its 15 months as a public company, NIO has seen rising sales and strong customer loyalty, but its rapidly declining cash has called its future into question. As of Sept. 30, the company had just $274.3 million remaining, down from $1.123 billion on March 31.

Now what

If this report is accurate and if the deal closes, then it's extremely bullish for NIO -- but I think that auto investors should tread a bit carefully here. Note that an earlier bailout deal fell through at the last minute because of concerns about the company's viability. Use caution with this one. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.