Abu Dhabi pours $738.5M into China’s Tesla challenger Nio

China’s electric vehicle companies are pouring into the Middle East where both investors and consumers have a growing appetite for the country’s Tesla challengers.

Shanghai-based Nio announced Tuesday that CYVN Holdings, a smart mobility-focused investment vehicle majority-owned by the Abu Dhabi government, will invest a total of $738.5 million in the Chinese EV maker.

Nio, which is listed on NYSE, will issue 84,695,543 Class A ordinary shares at $8.72 apiece. In addition, CYVN has entered into an agreement with an affiliate of Tencent, which invested in Nio back in 2017, to purchase 40,137,614 Class A ordinary shares from the social and gaming giant.

Upon completion of the deals, the Abu Dhabi-backed firm will own a roughly 7% stake in Nio. CYVN will have the right to nominate one director to Nio’s board of directors so long as it continues to own no less than 5% of the EV maker.

Abu Dhabi’s strategic investment will also initiate a partnership to help Nio expand globally. Nio launched its internalization in 2021, starting with Norway followed by several other European markets. But now the United Arab Emirates, in its transition to net zero, has become an attractive market to China’s EV companies that are facing mounting price competition at home that’s in part sparked by Tesla.

Last year, a senior minister of the UAE unveiled that the country had plans to invest $160 billion in clean and renewable energy sources over the next three decades, building on top of the $40 billion already committed to clean energy over the last 15 years.

BYD, which is quickly catching up on Tesla’s global market share, announced its entry into the UAE in March through a partnership with local distributor Al-Futtaim, with plans to bring four of its models, including all-electric and hybrid vehicles, to the Middle Eastern country.

Geely, the largest private automaker in China with an expanding line of electric models, has also plugged itself into the UAE market by working with the luxury car importer AGMC.