China’s leading battery-swapping vehicle producer, NIO, has established its foothold in the Chinese EV industry and is now looking to expand into Europe. Over the past year, the company has made significant developments to help achieve its desired expansion. Recently it began construction of a third EV production plant, begun producing its own batteries, formed numerous partnerships with key industry players, and launched a sub-brand Onvo. These initiatives are part of NIO’s strategy to vertically integrate itself into the EV industry, enhancing the viability of its battery-swapping technology.

Expansion of Production Capacity

NIO has commenced construction of its third EV manufacturing facility (F3) in Huainan, Anhui Province, approximately 100km north of its other two facilities (F1 and F2) in Hefei. Upon completion, NIO will have a theoretical production capacity of one million vehicles per year, rivalling Tesla’s 1.1 million vehicle production capability in China. Despite this potential, the company is currently aiming to produce just 100,000 vehicles annually at F3, significantly lower than its licensed capacity of 600,000.

Launch of the Onvo sub-brand

In May 2024, NIO launched its low-priced sub-brand, Onvo. This brand aims to release a new model annually, targeting a broad range of vehicle segments. Onvo is positioned to attract a wider customer base, complementing NIO’s more premium offerings and improving its market presence.

Strategic Partnerships and Battery Development

Since late last year, NIO has partnered with at least six Chinese EV manufacturers, granting them access to its battery-swapping stations. These partnerships, which include major players such as Geely, Changan, and GAC, are aimed at enhancing the adoption of NIO’s battery-swapping technology across the industry.

In March 2023, NIO signed an agreement with CATL to jointly develop longer-lasting batteries. Following this, in April, NIO with its partner WeLion began mass production of their 150KWh semi-solid-state batteries, with these expected to start appearing in vehicles in Q2 2024. This further develops its operations in the battery area building on partnerships it has with CATL and CALB. Meanwhile, the sub-brand Onvo will source its batteries from BYD.

Rho’s evaluation, NIO’s sales and expansion challenges

In 2023, NIO sold 160,000 units, with only a handful of these sold outside China. Domestically, NIO operates over 2,400 battery-swapping stations and plans to add another 1,000 this year. In contrast, NIO has just 43 swapping stations in Europe, spread across Germany, Norway, and Sweden. The company’s European sales numbered just over 300 units in 2023. This highlights two challenges that it faces when selling its vehicles in Europe, the need for accesses to export mechanisms, such as Ro-Ro ships, as well as investment into its own swapping/charging infrastructure, this significantly increases its capital expenditure.

Considering it sold only 300 vehicles in Europe in 2023, this highlights a challenge that, to sell its vehicles, NIO must first establish its swapping infrastructure. This dual need for accesses to export mechanisms, such as Ro-Ro ships, and investment into its own swapping/charging infrastructure significantly increases its capital expenditure in European expansion.

NIO, like many other Chinese EV manufacturers, is struggling to turn a profit. In Q1 2024, the company reported a loss of RMB5.59 billion (USD771 million), the same in all previous quarters in 2023. Despite this, NIO is still committed to expanding in both Europe and China. However, it faces two major hurdles, a slowing demand for EVs and an increasingly complex geopolitical landscape. Achieving profitability will undoubtedly take time, but in the meantime, NIO has made significant efforts to establish itself firmly within the EV industry.

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Image credit: Adobe Stock

Sources: NIO, Mark Lines, Reuters

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