Guangzhou Automobile Group Co. Ltd. confirmed Jan. 16 that it is in talks with Chinese electric-car maker NIO Ltd. about a financing proposal, but clarified that any potential investment would not exceed $150 million.

The development comes after Sina reported Jan. 15 that the state-owned carmaker is preparing to invest up to $1 billion in NIO, sending the startup's shares up as much as 19% in New York trading.

GAC said there is still "great uncertainty" on whether an agreement can be reached as the talks are still at an early stage. The carmaker said it would invest through a subsidiary if it decides to proceed with the plan.

NIO had issued a statement on Jan. 15 in response to queries from the New York Stock Exchange, confirming it is exploring financing and strategic opportunities with GAC, but maintained that all talks are preliminary.

The potential funding discussion comes less than three weeks after NIO reported a net loss of 2.52 billion Chinese yuan in the third quarter ended Sept. 30, 2019.

The company said at the time that it "operates with continuous loss and negative equity," and said it does not have enough cash balance to provide for working capital and liquidity for continuous operation in the next 12 months. It noted that it is working on several financing projects but said the completion of these is subject to "certain uncertainties."

The Chinese electric vehicle sector was hit by a sharp sales drop in 2019 following the phasing out of subsidies introduced in late June 2019.