Media and Third-Party Coverage on Grizzly Research’s Investigation Into NIO Inc. – Grizzly Research LLC

As of September 30, 2021, NIO's battery-leasing affiliate Wuhan Weineng had signed up 19,000 Battery-as-a-Service subscribers but was sitting on 40,053 batteries, a surplus of 21,053 packs it had no disclosed subscriber base to use.

Grizzly Research says NIO used that unconsolidated related party to accelerate years of subscription revenue into single upfront battery sales, oversupply Weineng with inventory it didn't need, and shift battery depreciation off its own books, all while NIO's filings describe having only "limited control" over the entity. Grizzly Research, which holds a short position in NIO, argues the arrangement inflated revenue by roughly 10% and net income by 95% for the nine months ended September 2021, and that related-party loans, a pledge of CEO Bin Li's "Users Trust" shares to UBS, and unresolved government buyback obligations layer on further risk to public shareholders.

Ticker: NIO (NIO Inc.)
Research Firm: Grizzly Research
Report URL: https://grizzlyreports.com/media-and-third-party-coverage-on-grizzly-researchs-investigation-into-nio-inc/?ref=shortreport.fyi
Position Disclosure: Grizzly Research states that its associated persons, clients, investors, and/or affiliates had short positions in NIO securities at publication and could gain if NIO's securities declined.

Thesis

Grizzly Research argues NIO used its unconsolidated affiliate Wuhan Weineng to accelerate revenue recognition, oversupply batteries, shift costs off its balance sheet, and obscure related-party control, while separate government and insider arrangements add undisclosed financial risk.

• Revenue Pull-Forward: NIO's filings describe selling batteries to Weineng upfront while users subscribe separately for usage; Grizzly calculates Weineng's actual subscriber base would generate about RMB179 million over nine months versus the RMB2.796 billion NIO booked from Weineng, implying roughly RMB1.147 billion of revenue was pulled forward that would normally be recognized over approximately seven years.
• Battery Oversupply: Weineng's asset-backed-financing prospectus reported 40,053 batteries held against only 19,000 subscribers at September 30, 2021; Grizzly estimates the 21,053-battery gap generated an additional RMB1.47 billion in revenue and RMB294 million in net income, assuming a 20% battery margin.
• Depreciation Shift: NIO applied a five-to-eight-year useful life to battery-swap equipment, but by selling batteries to Weineng, Grizzly estimates NIO moved RMB2.25 billion of battery assets off its balance sheet and avoided up to RMB336 million of depreciation for the nine months ended September 2021, contributing to an estimated true net loss of RMB3.690 billion versus the reported RMB1.874 billion.
• Overlapping Control: NIO's 20-F says it has "limited control" over Weineng despite owning 19.8% and holding one of nine board seats, but Qichacha and LinkedIn records identify Weineng's chairman (Fei Shen) and general manager (Ronghua Lu) as sitting NIO employees, which Grizzly says gives NIO effective control over the affiliate's daily decisions.
• Government Buyback Bill: Local-government investors who put roughly RMB7 billion into NIO China in April 2020 for a 24.1% stake had already collected RMB13.5 billion through redemptions, according to multiple news outlets cited by Grizzly, which estimates the remaining 7.87% stake could require another RMB41.7 billion (about US$6.7 billion) against NIO's US$8.2 billion of cash and short-term investments at year-end 2021.
• Undisclosed Gambling Agreement: A March 2022 Sina Finance report described an alleged agreement tied to Hefei's 2020 investment requiring an IPO filing within 48 months, completion within 60 months, no change of control, a RMB120 billion NIO China revenue target for 2024, and a requirement that Bin Li personally repurchase government shares with 8.5% annual interest if those terms are missed.
• Pledged Users Trust: Bin Li transferred 50 million NIO shares to the NIO Users Trust in 2019 for user-benefit purposes; Grizzly cites BVI corporate records showing the trust's holding company, NIO Users Limited, was charged to UBS AG on June 28, 2021, with no disclosed pledge ratio, as NIO's share price fell from roughly US$50 to roughly US$23.

Catalysts

• Government redemption actions: Any move by local-government entities to exercise or expand redemption of the remaining 7.87% NIO China stake, which Grizzly estimates could cost NIO approximately US$6.7 billion; a redemption of that size would materially draw down NIO's cash position.
• Hefei agreement developments: Developments on the reported Hefei "Gambling Agreement," including the IPO filing/completion deadlines, the 8.5% buyback provision, and the RMB120 billion 2024 revenue target; confirmation or denial of these terms would clarify how much pressure NIO faces to hit aggressive growth targets.
• UBS pledge-related pressure: Any margin call, collateral demand, or forced sale tied to the UBS charge over NIO Users Limited following NIO's share-price decline; a forced sale of the pledged shares would be a direct market-moving event.
• Weineng and BaaS disclosures: Future NIO disclosures on sales to Weineng, Weineng's battery inventory, and BaaS subscriber counts; updated figures would let investors test Grizzly's revenue and depreciation estimates against actual filings.

Company Response

The report does not indicate that Grizzly sought comment from NIO, Weineng, Bin Li, or UBS, and it includes no response or rebuttal from any of these parties.

Notable Details

• Grizzly's investigators observed 25 NIO battery-swap stations at two-hour intervals and calculated weighted average utilization of just 39%, and said that after months of searching and inquiries at swap stations, they could not identify any Weineng storage facilities.
• NIO's 2020 20-F disclosed interest-free loans to Ningbo Meishan Bonded Port Area Weilan Investment, a company Qichacha records show is 80%-owned by Bin Li; after NIO said the loan was repaid in 2021, it paid Ningbo Meishan RMB50 million in November 2021 for a fund interest that NIO recorded at a RMB68.535 million fair value, with the fund's identity and strategy left undisclosed.
• Grizzly calculates NIO China's implied valuation rose roughly 28-fold between September 2020 and February 2021, then another threefold over the following seven months, a nearly 89-fold increase within about a year.
• The report notes that a battery sale of roughly RMB70,000 would, under normal BaaS subscription pricing of RMB980 to RMB1,480 per month, take approximately seven years to generate an equivalent amount of subscription revenue.

"Without all these accounting shenanigans, NIO's net loss would nearly double to 3.690 billion RMB!"

This appears in Grizzly's section on shifted depreciation costs and captures its central claim that the Weineng arrangement materially altered NIO's reported results.

FAQs

What does NIO (NIO) do, and why has it drawn short-seller scrutiny?

NIO is a Chinese electric-vehicle maker that offers a Battery-as-a-Service (BaaS) subscription program, letting customers buy a vehicle without a battery and pay a separate monthly fee for battery use. Grizzly Research alleges NIO used an unconsolidated affiliate, Wuhan Weineng, to book years of that subscription revenue upfront, which is why the stock has come under short-seller scrutiny.

What is NIO Inc.'s relationship with Wuhan Weineng, and why does it matter?

NIO co-founded Wuhan Weineng in August 2020 to hold the batteries used in its BaaS program; NIO currently owns about 19.8% of Weineng and appoints one of its nine directors. NIO's filings say it has only "limited control" over Weineng, but Grizzly's report found that Weineng's chairman and general manager are both current NIO employees, raising questions about how independent the affiliate really is.

Who is Grizzly Research, and what is its position on NIO?

Grizzly Research is the research firm that published the report examined here, and it discloses that its associated persons, clients, investors, and/or affiliates held short positions in NIO securities at the time of publication. Grizzly's disclosed short position means it stands to profit if NIO's share price falls, which is a financial interest readers should weigh alongside its findings.

What is Battery-as-a-Service (BaaS) and how could it affect NIO's reported revenue?

BaaS lets NIO customers buy a vehicle at a lower upfront price (at least RMB70,000 less) and pay RMB980 to RMB1,480 a month to subscribe to battery use, with Weineng owning the battery. Grizzly's analysis found that NIO's reported sales to Weineng vastly exceeded what Weineng's actual subscriber base could support, which it says let NIO recognize years of future subscription revenue immediately rather than collecting it monthly.

What is the alleged "Gambling Agreement" with Hefei government entities?

According to a March 2022 Sina Finance report cited by Grizzly, NIO's 2020 financing from Hefei-linked investors came with conditions including an IPO filing within 48 months, completion within 60 months, no change of control, a RMB120 billion revenue target for NIO China in 2024, and a requirement for Bin Li to repurchase government shares with 8.5% annual interest if these terms are not met. The terms have not been independently confirmed by NIO in the source report.

What is the UBS share pledge involving Bin Li, and why is it a risk to shareholders?

NIO CEO Bin Li transferred 50 million NIO shares to the NIO Users Trust in January 2019, a vehicle NIO describes as benefiting users and related projects. Grizzly cites British Virgin Islands corporate records showing the trust's holding company, NIO Users Limited, was pledged to UBS AG in June 2021, and notes NIO's share price fell from roughly $50 to roughly $23 afterward with the pledge ratio undisclosed, a decline the report says could trigger a margin call or forced sale.

How much could NIO owe local Chinese government investors, and can it afford it?

NIO China's local-government investors put roughly RMB7 billion in for a 24.1% stake in April 2020 and, per multiple news outlets cited by Grizzly, had already collected RMB13.5 billion through prior redemptions. Grizzly estimates the remaining 7.87% stake could cost NIO another RMB41.7 billion (about US$6.7 billion) to redeem, versus the US$8.2 billion in cash and short-term investments NIO reported at the end of 2021.

Did NIO respond to Grizzly Research's allegations?

The report does not indicate that NIO, Weineng, Bin Li, or UBS were asked to comment, and no response from any of these parties is included in the source report.

Disclaimer: This summary is not primary research and does not constitute investment advice. It is a brief overview of a detailed equity research report authored by the firm, organization, or source referenced in this article or at https://grizzlyreports.com/media-and-third-party-coverage-on-grizzly-researchs-investigation-into-nio-inc/, which contains extensive evidence, regulatory filings, and analysis; readers are encouraged to review the full report there for a comprehensive understanding. The content provided in this publication is not authored or originated by us — we act solely as a distributor and do not endorse, verify, or take responsibility for the accuracy, completeness, or reliability of the information presented. This publication is for informational purposes only and should not be construed as legal, business, investment, or tax advice. Always conduct independent due diligence and consult qualified professionals before making any decisions based on the information contained herein. We disclaim all liability for any loss or damage arising from reliance on third-party content, and the views expressed are solely those of the respective source and do not necessarily reflect our own.