Nio said it will acquire the manufacturing equipment and assets of the F1 and F2 plants from JAC for a total consideration of about RMB 3.16 billion.

(Image credit: CnEVPost)

Nio (NYSE: NIO) has bought the factory assets sold by its vehicle manufacturing partner Anhui Jianghuai Automobile Group (JAC), paving the way for it to manage manufacturing entirely on its own.

Nio became the buyer of two asset packages sold by JAC for a combined transaction price of RMB 3.16 billion yuan ($442 million), JAC said in a stock exchange announcement today.

The JAC sale included three asset packages, with Nio purchasing package 1 and package 3 for a transaction price of RMB 1.67 billion and RMB 1.49 billion, respectively.

Hefei Hengchuang Intelligent Technology Co Ltd purchased package 2, with a transaction price of RMB 1.42 billion.

In brief, the two asset packages purchased by Nio involve two plants' assets including equipment, and the asset package purchased by Hefei Hengchuang consists mainly of buildings and land use rights.

Specifically, the three asset packages include:

Package 1 involves the inventory, fixed assets and construction in progress of the third plant of JAC's passenger car company.

Appraised using the cost method, the net value of the assets was RMB 1.56 billion and the appraised value was RMB 1.64 billion, representing an increase in value of RMB 76.11 million or 4.87 percent.

Package 2 involves the buildings, construction in progress and land use rights of the third plant of JAC passenger vehicle company.

The net value of the assets was valued at RMB 1.18 billion and the appraised value was RMB 1.39 billion, representing an increase in value of RMB 209 million, or an appreciation rate of 17.66 percent, using the cost method and the market method of valuation.

Package 3 involves the structures and equipment of Xinqiao plant of JAC passenger vehicle company.

Appraised using the cost method, the net value of the asset was RMB 1.47 billion, with an appraised value of RMB 1.47 billion, representing an increase in value of RMB 703,100, or an appreciation rate of 0.05 percent.

Shortly after JAC's announcement, Nio confirmed the deal in its third-quarter earnings report.

Nio entered into a definitive agreement on December 5 to acquire certain manufacturing facilities and assets from JAC, a major state-owned automaker in China that currently co-produces all of Nio's existing models with Nio, the company said in its financial report.

"Pursuant to the definitive agreements, the Company will acquire the manufacturing equipment and assets of the first advanced manufacturing base and the second advanced manufacturing base from JAC for a total consideration of approximately RMB3.16 billion, excluding tax," Nio said.

JAC announced plans on October 19 to transfer billions of yuan worth of factory assets in three packages, including Nio's F1 and F2 plants in Hefei, Anhui province.

The three asset packages were listed on the website of the Anhui Assets and Equity Exchange on November 7, with a December 4 deadline for listing, according to documents seen by CnEVPost.

They are state-owned assets, and purchasers are required to pay the transfer price in a lump sum within five working days of the effective date of the transaction contract, according to the documents.

Following JAC's announcement in October, several local media outlets reported that Nio could acquire the assets and seek its own electric vehicle (EV) production status.

Nio did not confirm these reports at the time, but said the move by its vehicle production partner would not affect its production and operations.

JAC released a plan to transfer these assets on October 19, and the three asset packages were listed on the website of Anhui Assets and Equity Exchange on November 7, with a December 4 deadline for listing, according to the document seen by CnEVPost.

They are state-owned assets, and purchasers are required to pay the transfer price in a lump sum within five working days from the effective date of the transaction contract, according to the document.

Acquiring the two plant assets sets the stage for Nio to make cars entirely on its own, and the company has already qualified to build cars.

On December 4, Nio entered China's Ministry of Industry and Information Technology's Vehicle Manufacturing Enterprise Credit Information Management System, meaning it will be able to produce cars under its own name.

China requires local automakers to have qualifications issued by economic planner the National Development and Reform Commission to produce vehicles under their own brand names.

Nio previously had no such qualification; it used JAC's qualification, and the vehicles are produced at two factories it built in partnership with JAC, with Nio paying for contract production.

The company's local counterpart, Xpeng (NYSE: XPEV), also initially adopted contract production, with its first production vehicle, the G3, being built on behalf of Haima Motor.

Xpeng's contract production agreement with Haima ends on December 31, 2021, after which Xpeng produces vehicles using production credentials it gained through an acquisition.

Li Auto (NASDAQ: LI) gained its own production credentials through an acquisition before it began mass production of its first model, the Li One.

($1 = RMB 7.1436 )

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