By Reuters | Updated: 06 December 2023
SHANGHAI, Dec 6 (Reuters) – Chinese electric vehicle maker Nio (9866.HK) plans to spin off its battery manufacturing unit, according to two people with knowledge of the matter, as part of the efforts by the company to turn profitable, reduce costs and improve efficiency.
The nascent battery unit, led by senior manufacturing engineers whose previous employers include Apple (AAPL.O) and Panasonic (6752.T), will seek external investors after the spin-off that could happen as early as the end of this year, with a valuation to be decided later, the people said.
They spoke on condition of anonymity because the information is confidential.
Nio declined to comment beyond founder and CEO William Li’s comments on an earnings call on Tuesday that the automaker would continue to do in-house research and development on batteries but now planned to outsource all of the manufacturing.
The company, which has a market value of $12.4 billion, currently buys all of its batteries from CATL (300750.SZ) and CALB Group (3931.HK).
The spin-off underscores Nio’s efforts to turn profitable sooner, as its previous plan was to develop and manufacture some batteries on its own and outsource production for the remainder to other suppliers like Tesla does, one the people said.
Under the plan, Nio battery unit’s top engineers, some of whose past experience also included working on quality and supplier management at Tesla’s (TSLA.O) Nevada battery factory, will join the new firm while some staff will be merged into other departments at Nio, both of the people said.
Nio hired these engineers in an effort to mass produce large cylindrical cells similar to Tesla’s 4680 in a planned plant in China’s eastern Anhui province in 2025 at the earliest, the first person said.
The assets to be spun off could include the planned plant, some testing equipment and intellectual property, the person added.
The planned plant was expected to have an annual capacity to produce 40 gigawatt hours (GWh) of batteries that could power about 400,000 long-range EVs, Reuters reported in February.
Nio ranked ninth in EV and plug-in hybrid sales in the first 10 months of the year in China with 126,067 units sold, according to data from China Passenger Car Association.
The company reported a third-quarter loss of 4.56 billion yuan ($637.06 million) on Tuesday, a 10.8% increase from the same period a year ago amid a fierce EV price war.
Li told analysts on the earnings call that the company would defer its plan of bringing battery production in-house because that would not help it improve profitability over the next three years. He did not mention any spin-off plans for the battery manufacturing unit.
Nio has for years pursued a strategy of developing end-to-end technologies for EVs including advanced manufacturing, batteries, autonomous driving and chips.
But Nio is now working to reassure investors concerned that it has taken on too much as it has in recent years also ventured into areas such as smartphone manufacturing and battery swapping, and invested heavily in drawing top talent and facilities.
The company announced last month that it would trim its workforce and defer long-term investments, efforts executives said could save up to 2 billion yuan in costs in 2024.
It has also partnered with Geely (0175.HK) and state-owned Changan Automobile (000625.SZ) to jointly develop EVs capable of battery-swaps and to build swapping stations to reduce costs.
The company is also expanding abroad. Reuters reported in October that it was considering building a dealer network in Europe to speed up sales growth, in part to ease cash pressure.
($1 = 7.1579 Chinese yuan renminbi)
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