The Chinese electric car manufacturer Nio (9866. HK) is reportedly planning to spin off its battery production business as part of its attempts to earn a profit, decrease costs, and increase efficiency. This information comes from two individuals who are familiar with the situation.
Under the direction of top production engineers whose previous employers include Apple (AAPL.O) and Panasonic (6752.T), the young battery unit will look for outside investors after the spin-off, which could happen as soon as the end of this year. According to the people who spoke with the company, a valuation will be set later.
Because the material should be kept private, they talked under the condition of anonymity.
During an earnings call on Tuesday, Nio declined to comment beyond the statements made by William Li, the company’s founder and CEO. Li stated that the carmaker would continue researching and developing batteries in-house but intends to outsource all the production to the company.
CATL (300750. SZ) and CALB Group (3931. HK) are the suppliers of all the firm’s batteries. The company’s market value is now estimated to be $12.4 billion.
The spin-off highlights Nio’s attempts to generate a profit sooner, as the company’s prior goal was to design and produce sure batteries on its own and outsource manufacturing for the remaining batteries to external vendors, similar to what Tesla does, according to one of the sources.
According to both individuals, the plan calls for the top engineers from the Nio battery section to join the new company. Some engineers have previous quality and supplier management expertise at Tesla’s Nevada battery plant (TSLA.O.). Additionally, some of the workforce will be amalgamated into other departments at Nio.
As far as the first person is concerned, Nio has employed these engineers to mass-produce giant cylindrical cells comparable to Tesla’s 4680 in a factory scheduled to be located in the eastern province of Anhui in China by the year 2025 at the earliest.
There is a possibility that the proposed factory, specific testing equipment, and intellectual property will be among the assets that will be spun off, according to the individual.
According to a report by Reuters in February, the projected factory was anticipated to have the ability to create forty-gigawatt hours (GWh) of batteries annually, which would be sufficient to power around four hundred thousand long-range electric vehicles.
AN INCREASING LOSSES
According to data provided by the China Passenger Car Association, Nio achieved ninth in sales of electric vehicles and plug-in hybrids in China during the first ten months of the year. The company sold 126,067 units.
During the third quarter, the firm posted a loss of 4.56 billion yuan ($637.06 million), representing a 10.8% rise from the same time a year earlier. This comes amid a vicious pricing battle for electric vehicles.
During the results call, Li informed the analysts that the firm would postpone its plan to bring battery manufacture in-house since doing so would not assist the company in improving its profitability over the next three years. The battery manufacturing unit was not included in the spin-off proposals he mentioned.
Nio has been working toward developing end-to-end technologies for electric vehicles (EVs) for several years. These technologies include improved manufacturing, batteries, autonomous driving, and processors.
On the other hand, Nio is currently attempting to reassure investors who are afraid it has taken on too much. In recent years, Nio has also delved into sectors such as smartphone production and battery swapping, and it has made significant investments in attracting top personnel and facilities.
The previous month, the firm announced it would reduce its personnel and postpone long-term expenditures. According to officials, these actions might result in cost savings of up to two billion yuan in 2024.
Additionally, it has partnered with state-owned companies Geely (0175. HK) and Changan Automobile (000625. SZ) to jointly develop electric vehicles with the ability to swap batteries and build swapping stations to reduce costs.
Additionally, the corporation is growing its operations in international markets. Reuters reported in October that the company was contemplating the establishment of a dealer network in Europe to accelerate sales development, partly to alleviate the pressure on cash.
