By Maureen Farrell and Joanne Chiu
Chinese electric-vehicle maker NIO Inc. rallied in its market debut Wednesday after the Shanghai-based company, which has billed itself as an emerging rival to Tesla Inc., priced its offering in the U.S. near the bottom of expectations.
The startup, backed by Chinese internet giant Tencent Holdings Ltd., had to contend with a difficult market environment in launching its initial public offering. Shares in rival car makers have slumped and Chinese stocks have been buffeted by concerns about growth, trade and currency weakness.
"We had actually a healthy book and then some orders got pulled or reduced because of market conditions," NIO's chief financial officer, Louis Hsieh, said in an interview.
Mr. Hsieh said investors were also wary that the company didn't have a long operating history, which he called a "fair criticism."
American depositary receipts of NIO closed 5.4% higher than the company's IPO price of $6.26 after spending much of the morning in the red. The stock traded down as much as 15% earlier Wednesday. At its IPO price, the company was valued at about $6.4 billion.
Mr. Hsieh said if NIO meets two milestones -- delivering 10,000 vehicles to customers in 2018 and launching a smaller family sport-utility vehicle -- in the next six to nine months, he expects investor enthusiasm will be bolstered.
At $6.26 per ADR, the IPO would yield proceeds of $1 billion, before subtracting the costs of the share sale. Mr. Hsieh said NIO needs the capital to build its own manufacturing plant in Shanghai.
After $2.4 billion was raised in four rounds of financing, the public markets were a less dilutive choice for NIO, Mr. Hsieh said. The company also weighed listing in Hong Kong but ultimately opted for the U.S. for its "deeper, more transparent investor base" and the option to list alongside its main peer, Tesla, he said.
The offering size falls short of NIO's earlier target of $2 billion to $3 billion as reported by The Wall Street Journal. More recently the company had set an indicative price range of $6.25 to $8.25 a share.
The car maker, which was founded by Chinese entrepreneur Bin Li in 2014, has yet to generate much revenue, reporting $7 million of sales in the first half of 2018.
The fundraising is also a test of investors' confidence in the development of electric cars in the world's biggest automobile market. Shares in Chinese rival BYD Co. have fallen 36% this year in Hong Kong, compared with the benchmark Hang Seng Index's 12% decline.
China's car sales in August dropped for the second month in a row, according to the state-backed China Association of Automobile Manufacturers. Analysts blamed the decline on a combination of market saturation and weak consumer confidence.
Meanwhile, tighter scrutiny of Tesla's production capability and Chief Executive Elon Musk's short-lived attempt to take the U.S. electric-car maker private have sent its shares down more than one-fifth since Aug. 7, when Mr. Musk tweeted about the privatization.
Mr. Hsieh said his company has been hiring many former Tesla employees and they have fit in quickly. "We have been able to pick up a lot of quality talent." Tesla didn't immediately respond to a request for comment.
Late last year, NIO launched its first mass-produced car, a seven-seat electric sport-utility vehicle. It plans to start delivering a second, smaller SUV in the first half of 2019.
Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co led Wednesday's offering.
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