UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of December 2020
Commission File Number: 001-38638
NIO Inc.
(Registrant’s Name)
Building 20, 56 Antuo Road
Jiading District, Shanghai 201804
People’s Republic of China
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
EXPLANATORY NOTE
Exhibit 99.1 to this Current Report on Form 6-K and the interactive data files attached as exhibits hereto are hereby incorporated by reference into the Registration Statement on Form F-3 of NIO Inc. (File No. 333-239047) and shall be a part thereof from the date on which this Current Report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NIO Inc.
| By: | /s/ Wei Feng |
| Name: | Wei Feng |
| Title: | Chief Financial Officer |
Date: December 10, 2020
EXHIBIT INDEX
Exhibit Number |
| Description of Document |
99.1* | | Unaudited Condensed Consolidated Interim Financial Statements—NIO Inc. |
101.INS* | | Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH* | | Inline XBRL Taxonomy Extension Schema Document |
101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith.
Exhibit 99.1
INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page | |
Unaudited Interim Condensed Consolidated Financial Statements | |
F-2 | |
F-4 | |
F-5 | |
F-7 | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements | F-8 |
F-1
NIO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except for share and per share data)
As of December 31, | As of September 30, | |||||
| 2019 |
| 2020 |
| 2020 | |
RMB | RMB | USD | ||||
Note 2(e) | ||||||
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
| |
| |
| |
Restricted cash |
| |
| |
| |
Short-term investment |
| |
| |
| |
Trade receivable |
| |
| |
| |
Amounts due from related parties |
| |
| |
| |
Inventory |
| |
| |
| |
Prepayments and other current assets |
| |
| |
| |
Expected credit loss provision – current | — | ( | ( | |||
Total current assets |
| |
| |
| |
Non-current assets: |
| |||||
Long-term restricted cash |
| |
| |
| |
Property, plant and equipment, net |
| |
| |
| |
Intangible assets, net |
| |
| |
| |
Land use rights, net |
| |
| |
| |
Long-term investments |
| |
| |
| |
Amounts due from related parties |
| — |
| |
| |
Right-of-use assets–operating lease | | | | |||
Other non-current assets |
| |
| |
| |
Expected credit loss provision – non-current | — | ( | ( | |||
Total non-current assets |
| |
| |
| |
Total assets |
| |
| |
| |
LIABILITIES |
|
|
|
|
| |
Current liabilities: |
|
|
|
|
| |
Short-term borrowings |
| |
| |
| |
Trade payable |
| |
| |
| |
Amounts due to related parties |
| |
| |
| |
Taxes payable |
| |
| |
| |
Current portion of operating lease liabilities | | | | |||
Current portion of long-term borrowings |
| |
| |
| |
Accruals and other liabilities |
| |
| |
| |
Total current liabilities |
| |
| |
| |
Non-current liabilities: |
|
|
|
|
| |
Long-term borrowings |
| |
| |
| |
Non-current operating lease liabilities | | | | |||
Other non-current liabilities |
| |
| |
| |
Total non-current liabilities |
| |
| |
| |
Total liabilities |
| |
| |
| |
Commitments and contingencies (Note 24) |
The accompanying notes are an integral part of these consolidated financial statements.
F-2
NIO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except for share and per share data)
As of December 31, | As of September 30, | |||||
| 2019 |
| 2020 |
| 2020 | |
RMB | RMB | USD | ||||
Note 2(e) | ||||||
MEZZANINE EQUITY | ||||||
Redeemable non-controlling interests | | | | |||
Total mezzanine equity |
| |
| |
| |
SHAREHOLDERS’ (DEFICIT)/EQUITY | ||||||
Class A Ordinary Shares (US$ |
| |
| |
| |
Class B Ordinary Shares (US$ |
| |
| |
| |
Class C Ordinary Shares (US$ |
| |
| |
| |
Less: Treasury shares ( |
| — |
| — |
| — |
Additional paid in capital |
| |
| |
| |
Accumulated other comprehensive loss |
| ( |
| ( |
| ( |
Accumulated deficit |
| ( |
| ( |
| ( |
Total NIO Inc. shareholders’ (deficit)/equity |
| ( |
| |
| |
Non-controlling interests |
| |
| |
| |
Total shareholders’ (deficit)/equity |
| ( |
| |
| |
Total liabilities, mezzanine equity and shareholders’ (deficit)/equity |
| |
| |
| |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
NIO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(All amounts in thousands, except for share and per share data)
Nine Months Ended September 30, | ||||||
| 2019 |
| 2020 |
| 2020 | |
RMB | RMB | USD | ||||
Note 2(e) | ||||||
Revenue: |
|
|
|
|
|
|
Vehicle sales |
| |
| |
| |
Other sales |
| |
| |
| |
Total revenues |
| |
| |
| |
Cost of sales: |
|
|
|
| ||
Vehicle sales |
| ( |
| ( |
| ( |
Other sales |
| ( |
| ( |
| ( |
Total cost of sales |
| ( |
| ( |
| ( |
Gross (loss)/profit |
| ( |
| |
| |
Operating expenses: |
|
|
|
| ||
Research and development |
| ( | ( |
| ( | |
Selling, general and administrative |
| ( | ( |
| ( | |
Other operating loss, net | — | ( | ( | |||
Total operating expenses |
| ( | ( |
| ( | |
Loss from operations |
| ( | ( |
| ( | |
Interest income |
| | |
| | |
Interest expenses |
| ( | ( |
| ( | |
Share of losses of equity investees, net of tax |
| ( | ( |
| ( | |
Other income, net |
| | |
| | |
Loss before income tax expense |
| ( | ( |
| ( | |
Income tax expense |
| ( | ( |
| ( | |
Net loss |
| ( | ( |
| ( | |
Accretion on redeemable non-controlling interests to redemption value |
| ( |
| ( |
| ( |
Net loss attributable to non-controlling interests |
| |
| |
| |
Net loss attributable to ordinary shareholders of NIO Inc. |
| ( |
| ( |
| ( |
Net loss |
| ( |
| ( |
| ( |
Other comprehensive (loss)/income |
|
|
|
|
|
|
Foreign currency translation adjustment, net of |
| ( |
| |
| |
Total other comprehensive (loss)/income |
| ( |
| |
| |
Total comprehensive loss |
| ( |
| ( |
| ( |
Accretion on redeemable non-controlling interests to redemption value |
| ( |
| ( |
| ( |
Net loss attributable to non-controlling interests |
| |
| |
| |
Comprehensive loss attributable to ordinary shareholders of NIO Inc. |
| ( |
| ( |
| ( |
Weighted average number of ordinary shares used in computing net loss per share |
|
|
|
|
|
|
Basic and diluted |
| |
| |
| |
Net loss per share attributable to ordinary shareholders |
|
|
|
|
|
|
Basic and diluted |
| ( |
| ( |
| ( |
Weighted average number of ADS used in computing net loss per ADS |
|
|
|
|
|
|
Basic and diluted |
| |
| |
| |
Net loss per ADS attributable to ordinary shareholders |
|
|
|
|
|
|
Basic and diluted |
| ( |
| ( |
| ( |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
NIO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY/(DEFICIT)
(All amounts in thousands, except for share and per share data)
Accumulated | ||||||||||||||||||||
Additional | Other | Total | Non- | |||||||||||||||||
Ordinary Shares | Treasury Shares | Paid in | Comprehensive | Accumulated | Shareholders’ | Controlling | ||||||||||||||
| Shares |
| Par value |
| Shares |
| Amount |
| Capital |
| Loss |
| Deficit |
| Equity/(Deficit) |
| Interests |
| Total Equity/(Deficit) | |
Balance as of December 31, 2018 |
| |
| |
| ( |
| ( |
| |
| ( |
| ( |
| |
| ( |
| |
Accretion on redeemable non-controlling interests to redemption value |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
| — |
| ( |
Purchase of capped call options and zero-strike call options in connection with issuance of convertible senior notes | — | — | — | — | ( | — | — | ( | — | ( | ||||||||||
Exercise of share options |
| |
| |
| |
| — |
| |
| — |
| — |
| |
| — |
| |
Vesting of restricted shares |
| — |
| — |
| |
| — |
| |
| — |
| — |
| |
| — |
| |
Vesting of share options |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| |
| — |
| |
Cancellation of restricted shares |
| ( |
| ( |
| |
| |
| ( |
| — |
| — |
| ( |
| — |
| ( |
Capital injection by non-controlling interests |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| |
Foreign currency translation adjustment |
| — |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( |
| — |
| ( |
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
| ( |
| ( |
Balance as of September 30, 2019 |
| |
| |
| ( |
| — |
| |
| ( |
| ( |
| ( |
| |
| ( |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
NIO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) /EQUITY
(All amounts in thousands, except for share and per share data)
Accumulated | ||||||||||||||||||||
Additional | Other | Total | Non- | |||||||||||||||||
Ordinary Shares | Treasury Shares | Paid in | Comprehensive | Accumulated | Shareholders’ | Controlling | Total | |||||||||||||
| Shares |
| Par value |
| Shares |
| Amount |
| Capital |
| Loss |
| Deficit |
| (Deficit)/Equity |
| Interests |
| Deficit/Equity | |
Balance as of December 31, 2019 |
| |
| |
| ( |
| — |
| |
| ( |
| ( |
| ( |
| |
| ( |
Cumulative effect of adoption of new accounting standard(Note 2(i)) | — | — | — | — | — | — | ( | ( | — | ( | ||||||||||
Accretion on redeemable non-controlling interests to redemption value |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( |
| — |
| ( |
Issuance of ordinary shares | | | — | — | | — | — | | — | | ||||||||||
Issuance of restricted shares | | | — | — | | — | — | | — | | ||||||||||
Conversion of convertible notes to ordinary shares | | | — | — | | — | — | | — | | ||||||||||
Exercise of share options | |
| |
| |
| — |
| |
| — |
| — |
| |
| — |
| | |
Vesting of restricted shares |
| — |
| — |
| |
| — |
| |
| — |
| — |
| |
| — |
| |
Vesting of share options |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| |
| — |
| |
Cancellation of restricted shares |
| ( |
| — |
| |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
Capital withdrawal by non-controlling interests |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
Foreign currency translation adjustment |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| |
| — |
| |
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
| ( |
| ( |
Balance as of September 30, 2020 |
| |
| |
| ( |
| — |
| |
| ( |
| ( |
| |
| |
| |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
NIO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands, except for share and per share data)
Nine Months Ended September 30, | ||||||
| 2019 |
| 2020 |
| 2020 | |
RMB | RMB | USD | ||||
Note 2(e) | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
Net loss |
| ( |
| ( |
| ( |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
| |||
Depreciation and amortization |
| |
| |
| |
Expected credit loss expense | — | | | |||
Impairment on other assets | | | | |||
Foreign exchange loss | | | | |||
Share-based compensation expenses |
| |
| |
| |
Changes in fair value for an equity investment |
| ( |
| — |
| — |
Share of losses of equity investees | | | | |||
Loss on disposal of property, plant and equipment |
| |
| |
| |
Amortization of right-of-use assets |
| |
| |
| |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepayments and other current assets |
| ( |
| |
| |
Inventory |
| ( |
| ( |
| ( |
Other non-current assets |
| ( |
| |
| |
Operating lease liabilities | ( | ( | ( | |||
Taxes payable |
| ( |
| ( |
| ( |
Trade receivable |
| ( |
| ( |
| ( |
Trade payable |
| |
| |
| |
Long-term receivables |
| ( |
| ( |
| ( |
Non-current deferred revenue |
| |
| |
| |
Accruals and other liabilities |
| |
| ( |
| ( |
Other non-current liabilities |
| |
| |
| |
Net cash used in operating activities |
| ( |
| ( |
| ( |
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| |
Purchase of property, plant and equipment and intangible assets |
| ( |
| ( |
| ( |
Purchases of short-term investments |
| ( |
| ( |
| ( |
Proceeds from sale of short-term investments |
| |
| |
| |
Acquisitions of equity investees |
| ( |
| ( |
| ( |
Proceeds from disposal of property and equipment | — | | | |||
Net cash provided by/(used in) investing activities |
| |
| ( |
| ( |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
Proceeds from exercise of stock options |
| |
| |
| |
Capital injection from redeemable non-controlling interests |
| — |
| |
| |
Capital withdrawal by non-controlling interests | — | ( | ( | |||
Repurchase of redeemable non-controlling interests | — | ( | ( | |||
Proceeds from issuance of convertible promissory note |
| |
| |
| |
Proceeds from borrowings |
| |
| |
| |
Repayments of borrowings |
| ( |
| ( |
| ( |
Principal payments on finance leases | ( | ( | ( | |||
Proceeds from issuance of ordinary shares |
| — |
| |
| |
Net cash provided by financing activities |
| |
| |
| |
Effects of exchange rate changes on cash, cash equivalents and restricted cash |
| |
| ( |
| ( |
NET (DECREASE)/INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
| ( |
| |
| |
Cash, cash equivalents and restricted cash at beginning of the period |
| |
| |
| |
Cash, cash equivalents and restricted cash at end of the period |
| |
| |
| |
NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
| |||
Accruals related to purchase of property and equipment |
| |
| |
| |
Issuance of restricted shares | — | | | |||
Conversion of convertible notes to ordinary shares | — | | | |||
Accretion on redeemable non-controlling interests to redemption value | | | | |||
Supplemental Disclosure |
|
|
|
|
|
|
Interest paid |
| |
| |
| |
Income taxes paid |
| |
| |
| |
The accompanying notes are an integral part of these consolidated financial statements.
F-7
NIO INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
1. Organization and Nature of Operations
NIO Inc. (“NIO”, or “the Company”) was incorporated under the laws of the Cayman Islands in November, 2014, as an exempted company with limited liability. The Company was formerly known as NextCar Inc.. It changed its name to NextEV Inc. in December, 2014, and then changed to NIO Inc. in July, 2017. The Company, its subsidiaries and consolidated variable interest entities (“VIEs”) are collectively referred to as the “Group”.
The Group designs and develops high-performance fully electric vehicles. It launched the first volume manufactured electric vehicle, the ES8, to the public in December 2017. The Group jointly manufactures its vehicles through strategic collaboration with other Chinese vehicle manufacturers. The Group also offers Energy and Service packages to its users. As of December 31, 2019 and September 30, 2020, its primary operations are conducted in the People’s Republic of China (“PRC”). The Group began to sell its first vehicles in June 2018. As of September 30, 2020, the Company’s principal subsidiaries and VIEs are as follows:
| Equity |
| Place and Date of incorporation |
| ||
Subsidiaries | interest held | or date of acquisition | Principal activities | |||
NIO NextEV Limited (“NIO HK”) (formerly known as NextEV Limited) |
| Hong Kong, February 2015 |
| Investment holding | ||
NIO GmbH (formerly known as NextEV GmbH) |
| Germany, May 2015 |
| Design and technology development | ||
NIO Holding Co., Ltd. ("NIO Holding") (formerly named NIO (Anhui) Holding Co., Ltd.) | Anhui, PRC, November 2017 | Headquarter and technology development | ||||
NIO Co., Ltd. (“NIO SH”) (formerly known as NextEV Co., Ltd.) | Shanghai, PRC, May 2015 |
| Headquarter and technology development | |||
NIO USA, Inc. (“NIO US”) (formerly known as NextEV USA, Inc.) |
| United States, November 2015 |
| Technology development | ||
XPT Limited (“XPT”) |
| Hong Kong, December 2015 |
| Investment holding | ||
NIO Performance Engineering Limited ("NPE") | United Kingdom, July 2019 | Marketing and technology development | ||||
NIO Sport Limited (“NIO Sport”) (formerly known as NextEV NIO Sport Limited) |
| Hong Kong, April 2016 |
| Racing management | ||
XPT Technology Limited (“XPT Technology”) |
| Hong Kong, April 2016 |
| Investment holding | ||
XPT Inc. (“XPT US”) |
| United States, April 2016 |
| Technology development | ||
XPT (Jiangsu) Investment Co., Ltd. (“XPT Jiangsu”) |
| Jiangsu, PRC, May 2016 |
| Investment holding | ||
Shanghai XPT Technology Limited |
| Shanghai, PRC, May 2016 |
| Technology development | ||
XPT (Nanjing) E-Powertrain Technology Co., Ltd. (“XPT NJEP”) |
| Nanjing, PRC, July 2016 |
| Manufacturing of E-Powertrain | ||
XPT (Nanjing) Energy Storage System Co., Ltd. (“XPT NJES”) |
| Nanjing, PRC, October 2016 |
| Manufacturing of battery pack | ||
NIO Power Express Limited (“PE HK) |
| Hong Kong, January 2017 |
| Investment holding | ||
NextEV User Enterprise Limited (“UE HK”) |
| Hong Kong, February 2017 |
| Investment holding | ||
Shanghai NIO Sales and Services Co., Ltd. (“UE CNHC”) |
| Shanghai, PRC, March 2017 |
| Investment holding and sales and after sales management | ||
NIO Energy Investment (Hubei) Co., Ltd. (“PE CNHC”) |
| Wuhan PRC, April 2017 |
| Investment holding | ||
Wuhan NIO Energy Co., Ltd. (“PE WHJV”) |
| Wuhan, PRC, May 2017 |
| Investment holding | ||
XTRONICS (Nanjing) Automotive Intelligent Technologies Co. Ltd. (“XPT NJWL”) |
| Nanjing, PRC, June 2017 |
| Manufacturing of components | ||
XPT (Jiangsu) Automotive Technology Co., Ltd. (“XPT AUTO”) |
| Nanjing, PRC, May 2018 |
| Investment holding |
| Economic |
| Place and Date of incorporation | |
VIE and VIE’s subsidiaries | interest held | or date of acquisition | ||
Prime Hubs Limited (“Prime Hubs”) |
| BVI, October 2014 | ||
NIO Technology Co., Ltd. (“NIO SHTECH”) (formerly known as Shanghai NextEV Technology Co., Ltd.) |
| Shanghai, PRC, November 2014 | ||
Beijing NIO Network Technology Co., Ltd. (“NIO BJTECH”) |
| Beijing, PRC, July 2017 | ||
Shanghai Anbin Technology Co., Ltd. (“NIO ABTECH”) |
| Shanghai, PRC, April 2018 |
In accordance with the Article of Association of XPT NJWL, the Company has the power to control the board of directors of XPT NJWL to unilaterally govern the financial and operating policies of XPT NJWL and the non-controlling shareholder does not have substantive participating rights, therefore, the Group consolidates this entity.
F-8
NIO INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Variable interest entity
NIO SHTECH was established by Li Bin and Qin Lihong (the “Nominee Shareholders”) in November, 2014. In 2015, NIO SH, NIO SHTECH, and the Nominee Shareholders of NIO SHTECH entered into a series of contractual agreements, including a loan agreement, an equity pledge agreement, exclusive call option agreement and power of attorney that irrevocably authorized the Nominee Shareholders designated by NIO SH to exercise the equity owner’s rights over NIO SHTECH. These agreements provide the Company, as the only shareholder of NIO SH, with effective control over NIO SHTECH to direct the activities that most significantly impact NIO SHTECH’s economic performance and enable the Company to obtain substantially all of the economic benefits arising from NIO SHTECH. Management concluded that NIO SHTECH is a variable interest entity of the Company and the Company is the ultimate primary beneficiary of NIO SHTECH and shall consolidate the financial results of NIO SHTECH in the Group’s consolidated financial statements. In April 2018, the above mentioned contractual agreements were terminated. On the same date, NIO SHTECH became a subsidiary wholly owned by NIO ABTECH, who also became a VIE of the Group on that day. As of December 31, 2019 and September 30, 2020, NIO SHTECH did not have significant operations, nor any material assets or liabilities.
In October 2014, Prime Hubs, a British Virgin Islands (“BVI”) incorporated company and a consolidated variable interest entity of the Group, was established by the shareholders of the Group to facilitate the adoption of the Company’s employee stock incentive plans. The Company entered into a management agreement with Prime Hubs and Li Bin. The agreement provides the company with effective control over Prime Hubs and enables the Company to obtain substantially all of the economic benefits arising from Prime Hubs. As of December 31, 2019 and September 30, 2020, Prime Hubs held
In April 2018, NIO SH entered into a series of contractual arrangements with the Nominee Shareholders as well as NIO ABTECH and NIO BJTECH separately, each including a loan agreement, an equity pledge agreement, exclusive call option agreement and power of attorney that irrevocably authorized the Nominee Shareholders designated by NIO SH to exercise the equity owner’s rights over NIO ABTECH and NIO BJTECH. These agreements provide the Company, as the only shareholder of NIO SH, with effective control over NIO ABTECH and NIO BJTECH to direct the activities that most significantly impact their economic performance and enable the Company to obtain substantially all of the economic benefits arising from them. Management concluded that NIO ABTECH and NIO BJTECH are variable interest entities of the Company and the Company is the ultimate primary beneficiary of them and shall consolidate the financial results of NIO ABTECH and NIO BJTECH in the Group’s consolidated financial statements. As of September 30, 2020, NIO ABTECH and NIO BJTECH did not have significant operations, nor any material assets or liabilities.
Liquidity and Going Concern
The accompanying unaudited interim condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.
The Group has incurred losses and suffered operating cash outflow since its inception. For the nine months ended September 30, 2019 and 2020, the Group incurred net losses of RMB
2. Summary of Significant Accounting Policies
(a) Basis of presentation
The unaudited interim condensed consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Significant accounting policies followed by the Group in the preparation of the accompanying consolidated financial statements are summarized below. The interim financial data as of September 30, 2020 and for the nine months ended September 30, 2019 and 2020 is unaudited. In the opinion of management, the interim financial data includes all adjustments, consisting only of normal recurring adjustments, necessary to a fair statement of the results for the interim periods.
F-9
NIO INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(b) Principles of consolidation
The unaudited interim condensed consolidated financial statements include the financial statements of the Company, its subsidiaries and the VIE for which the Company is the ultimate primary beneficiary.
A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors (the “Board”): to cast majority of votes at the meeting of the Board or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
A VIE is an entity in which the Company, or its subsidiary, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with, ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the entity.
All significant transactions and balances between the Company, its subsidiaries and the VIE have been eliminated upon consolidation. The non-controlling interests in consolidated subsidiaries are shown separately in the unaudited interim condensed consolidated financial statements.
(c) Use of estimates
The preparation of the unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenue and expenses during the reported period in the unaudited interim condensed consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Group’s consolidated financial statements mainly include, but are not limited to, standalone selling price of each distinct performance obligation in revenue recognition, the valuation and recognition of share-based compensation arrangements, depreciable lives of property, equipment and software, assessment for impairment of long-lived assets, inventory valuation for excess and obsolete inventories, lower of cost and net realizable value of inventories, valuation of deferred tax assets, recoverability of receivables, warranty liabilities as well as redemption value of the convertible redeemable preferred shares. Actual results could differ from those estimates.
(d) Functional currency and foreign currency translation
The Group’s reporting currency is the Renminbi (“RMB”). The functional currency of the Company and its subsidiaries which are incorporated in HK is United States dollars (“US$”), except NIO Sport which operates mainly in United Kingdom and uses Great Britain pounds (“GBP”). The functional currencies of the other subsidiaries and the VIE are their respective local currencies. The determination of the respective functional currency is based on the criteria set out by ASC 830, Foreign Currency Matters.
Transactions denominated in currencies other than in the functional currency are translated into the functional currency using the exchange rates prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into functional currency using the applicable exchange rates at the balance sheet date. Non-monetary items that are measured in terms of historical cost in foreign currency are re-measured using the exchange rates at the dates of the initial transactions. Exchange gains or losses arising from foreign currency transactions are included in the consolidated statements of comprehensive loss.
The financial statements of the Group’s entities of which the functional currency is not RMB are translated from their respective functional currency into RMB. Assets and liabilities denominated in foreign currencies are translated into RMB at the exchange rates at the balance sheet date. Equity accounts other than earnings generated in current period are translated into RMB at the appropriate historical rates. Income and expense items are translated into RMB using the periodic average exchange rates. The resulting foreign currency translation adjustments are recorded in other comprehensive loss in the consolidated statements of comprehensive gain or loss, and the accumulated foreign currency translation adjustments are presented as a component of accumulated other comprehensive loss in the consolidated statements of shareholders’ (deficit)/equity. Total foreign currency translation adjustment (losses)/income were negative RMB
F-10
NIO INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(e) Convenience translation
Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive loss and consolidated statements of cash flows from RMB into US$ as of and for the nine months ended September 30, 2020 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB
(f) Fair value
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Group considers the principal or most advantageous market in which it would transact, and it also considers assumptions that market participants would use when pricing the asset or liability.
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:
Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2—Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.
Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
Financial assets and liabilities of the Group primarily consist of cash and cash equivalents, restricted cash, short-term investments, trade receivable, amounts due from related parties, prepayments and other current assets, long-term investments, trade payable, amounts due to related parties, short-term borrowings, taxes payable, accruals and other liabilities, long-term receivables and long-term borrowings. As of September 30, 2019, and 2020, the carrying values of these financial instruments are approximated to their fair values due to the short-term maturity of these instruments except for long-term receivables, long-term borrowings and certain investments which are carried at fair value at each balance sheet date. Certain long-term investments in equity investees classified within Level 3 are valued based on a model utilizing unobservable inputs which require significant management judgment and estimation.
When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates. Below is a description of the valuation techniques that the Group uses to measure the fair value of assets that the Group reports on its consolidated balance sheets at fair value on a recurring basis.
Time deposits. The Group values its time deposits held in certain bank accounts using quoted prices for securities with similar characteristics and other observable inputs, and accordingly, the Group classifies the valuation techniques that use these inputs as Level 2.
Short-term borrowings. The rates of interest under the loan agreements with the lending banks were determined based on the prevailing interest rates in the market. The Group classifies the valuation techniques that use these inputs as Level 2.
Short-term receivables and payables. Trade receivable and prepayments and other current assets are financial assets with carrying values that approximate fair value due to their short term nature. Trade payable, accruals and other liabilities are financial liabilities with carrying values that approximate fair value due to their short term nature.
Prepayments and other assets in non-current assets. Prepayments and other assets in non-current assets are financial assets with carrying values that approximates fair value due to the change in fair value after considering the discount rate. The Group estimated fair values of non-current prepayments and other assets using the discount cash flow method.
F-11
NIO INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(g) Cash, cash equivalents and restricted cash
Cash and cash equivalents represent cash on hand, time deposits and highly-liquid investments placed with banks or other financial institutions, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less.
Restricted cash is restricted to withdrawal for use or pledged as security is reported separately on the face of the Consolidated Balance Sheets. The Group’s restricted cash mainly represents (a) the secured deposits held in designated bank accounts for issuance of bank credit card; (b) time deposit that are pledged for property lease.
Cash, cash equivalents and restricted cash as reported in the unaudited interim condensed consolidated statement of cash flows are presented separately on our unaudited interim condensed consolidated balance sheet as follows:
December 31, |
| September 30, | ||
2019 | 2020 | |||
Cash and cash equivalents | |
| | |
Restricted cash | |
| | |
Long-term restricted cash | |
| | |
Total | |
| |
(h) Short-term investment
Short-term investments consist primarily of investments in fixed deposits with maturities between three months and one year and investments in money market funds and financial products issued by banks. As of December 31, 2019 and September 30, 2020, the investment in fixed deposits that were recorded as short-term investments amounted to RMB
(i) Current expected credit losses
In 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC Topic 326”), which amends previously issued guidance regarding the impairment of financial instruments by creating an impairment model that is based on expected losses rather than incurred losses. The Company adopted this ASC Topic 326 and several associated ASUs on January 1, 2020 using a modified retrospective approach with a cumulative effect recorded as increase of accumulated deficit with amount of RMB
The Company’s trade receivable, receivables of installment payments, deposits and other receivables are within the scope of ASC Topic 326. The Company has identified the relevant risk characteristics of its customers and the related receivables, prepayments, deposits and other receivables which include size, type of the services or the products the Company provides, or a combination of these characteristics. Receivables with similar risk characteristics have been grouped into pools. For each pool, the Company considers the historical credit loss experience, current economic conditions, supportable forecasts of future economic conditions, and any recoveries in assessing the lifetime expected credit losses. Other key factors that influence the expected credit loss analysis include customer demographics, payment terms offered in the normal course of business to customers, and industry-specific factors that could impact the Company’s receivables. Additionally, external data and macroeconomic factors are also considered. This is assessed at each quarter based on the Company’s specific facts and circumstances.
For the nine months ended September 30, 2020, the Company recorded RMB
(j) Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable primarily include amounts of vehicle sales in relation of government subsidy to be collected from government on behalf of customers, current portion of battery installment and receivables due from vehicle users. The Company recorded a provision for current expected credit losses.
F-12
NIO INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
The following table summarizes the activity in the allowance for credit losses related to accounts receivable for the nine months ended September 30, 2020:
| Nine Months Ended | |
September 30, 2020 | ||
Balance as at December 31, 2019 |
| |
Adoption of ASC Topic 326 |
| |
Balance as at January 1, 2020 |
| |
Current period reversal, net |
| ( |
Current period write-offs |
| ( |
Balance as at September 30, 2020 |
| |
Allowance for the accounts receivable recognized for the nine months ended September 30, 2019 was
(k) Inventory
Inventories are stated at the lower of cost or net realizable value. Cost is calculated on the average basis and includes all costs to acquire and other costs to bring the inventories to their present location and condition. The Group records inventory write-downs for excess or obsolete inventories based upon assumptions on current and future demand forecasts. If the inventory on hand is in excess of future demand forecast, the excess amounts are written off. The Group also reviews inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires the determination of the estimated selling price of the vehicles less the estimated cost to convert inventory on hand into a finished product. Once inventory is written-down, a new, lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
(l) Property, plant and equipment, net
Property, plant and equipment are stated at cost less accumulated depreciation and impairment loss, if any. Property and equipment are depreciated at rates sufficient to write off their costs less impairment and residual value, if any, over their estimated useful lives on a straight-line basis. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the related assets.
The estimated useful lives are as follows:
| Useful lives | |
Building and constructions | ||
Production facilities | ||
Charging & battery swap infrastructure |