Singapore’s sovereign wealth fund, GIC, has taken legal action against Chinese electric vehicle maker Nio Inc., accusing it of inflating revenues through complex accounting linked to its battery-swap business.
The lawsuit,Bloomberg reports, filed in August in the Southern District of New York, targets Nio, its CEO Li Bin, and former CFO Feng Wei.
It centres on how the company recognised income from transactions with an affiliate, Nio Battery Asset Co. — known as Weineng in Chinese. The case sheds light on a growing debate about financial transparency in the fast-moving EV sector.
What the lawsuit is about
According to Bloomberg, GIC alleges that Nio and its executives made “materially false and misleading statements” about their dealings with Weineng, a company created to support Nio’s battery subscription system.
According to the complaint, Weineng bought large volumes of batteries upfront from Nio, allowing the automaker to immediately record revenue from these sales.
The problem, GIC argues, is that end users — Nio’s customers — had not yet paid for those batteries through their subscription fees.
By booking all the revenue at once, instead of gradually as payments were received, Nio allegedly overstated its financial results.
Bloomberg notes that GIC claims this inflated the value of Nio’s shares and caused “significant losses” for the fund, which invested based on those reported figures.
The sovereign wealth fund is now seeking compensation for the losses it says it suffered, along with reimbursement of legal costs.
How Nio’s battery-swap model works
Nio’s battery-as-a-service (BaaS) model allows buyers to purchase its electric vehicles without owning the battery outright.
Instead, they pay a monthly fee to access a network of battery-swap stations where depleted batteries can be exchanged for charged ones within minutes.
This business structure lowers upfront costs for customers and supports Nio’s brand as a tech-driven EV company. But it also requires substantial investment in infrastructure and batteries, making cash flow and revenue recognition more complex.
The lawsuit alleges that Weineng acted as a financial intermediary, helping Nio to recognise revenue faster than it was actually earned.
Critics say that if proven true, this could expose weaknesses in how subscription-based EV firms account for internal transactions.
Why the case matters
The legal challenge comes at a time when Nio is already facing scrutiny over its financial health. Once viewed as a strong competitor to Tesla, the company has struggled with liquidity issues and heavy capital requirements.
Its shares fell nearly 10% in Hong Kong and 9.8% in Singapore after news of the lawsuit broke.
The case also overlaps with a previous 2022 lawsuit and an investigation sparked by a report from New York-based Grizzly Research, which made similar claims about inflated revenue through Weineng.
Nio had said it would form an independent committee to look into those allegations, but GIC’s action suggests investors remain unconvinced.
For now, the US court has stayed the new case because it mirrors the earlier 2022 complaint. However, both proceedings highlight growing pressure on EV manufacturers to be more transparent about their accounting practices — particularly when affiliates are involved.
What it means for investors and the EV industry
The GIC lawsuit could set an important precedent for how subscription and service-based EV companies record their income. If the court sides with GIC, it may prompt regulators and investors to demand stricter disclosure of related-party transactions and more conservative revenue recognition methods.
Beyond Nio, the outcome could affect other automakers experimenting with similar models that rely on recurring revenue streams and partnerships with affiliated entities.
While Nio has yet to comment publicly, the case underscores a broader issue: as EV firms innovate with new ownership models, their accounting practices will increasingly come under the same level of scrutiny as their technology.
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