China’s Nio explores investment and tech alliances with Mercedes. Two sources claimed Nio (9866. HK) had explored a partnership with Mercedes-Benz (MBGn.DE) to invest in the Chinese electric car company in return for technology.
According to reports, Nio founder and CEO William Li approached Mercedes CEO Ola Kaellenius early this year to invest in loss-making Nio and share its R&D expertise with Mercedes.
They stated the negotiations did not cover technology transfer and financial investment.
One source claimed Nio approached Mercedes with the tie-up plan, but Internal discussions in recent weeks showed reluctance and made it unlikely it would materialize.
It was unclear when the tie-up would be decided. Nio denied collaborating with Mercedes, calling it “untrue” without further explanation.
Mercedes responded, “Ola Kaellenius is in an ongoing regular dialogue with various industry leaders and peers, including William Li,” but had no intentions of collaborating with Nio.
The sources declined to be named since the topic is confidential. The Nio-Mercedes negotiations reflect a pattern of Chinese EV entrepreneurs sharing technology with major automakers to thrive in a consolidating local business despite financial constraints.
Such partnerships may also help Chinese EV businesses overcome trade hurdles. As global EV adoption accelerates, several incumbents are repositioning to catch up with Tesla (TSLA.O) and Chinese firms.
Volkswagen (VOWG_p.DE) was the first to sign accords in July to jointly develop new vehicles for China, the world’s largest auto market, using Xpeng’s (9868. HK) EV platforms and SAIC Motor Corp.’s (600104. SS) Audi technology.
Media reports and sources say China’s Leapmotor (9863. HK) has approached foreign companies like India’s steel-to-energy JSW Group, VW’s Jetta brand, and Stellantis (STLAM.MI) to license its EV platforms, battery, and motor technology. Leapmotor declined to comment.
China’s EV startups are modeling Tesla’s production ramp-up strategy by seeking partnerships and funding from major automakers. Elon Musk says a $50 million Mercedes investment saved Tesla in 2009.
Tencent Holdings (0700. HK), a Nio investor, has urged for more similar partnerships with big automakers. It lacks them.
“Legacy brands are too successful to produce smart EVs quickly. All CEOs of companies with hundreds of thousands of people face this difficulty “Nio’s Li told reporters in September at an event displaying its self-developed batteries, semiconductors, autonomous driving, and smart manufacturing technology.
“Rather than spending so much money and time on your own, isn’t it better to seek win-win via EV startups?” he said.
FRICTION
Mercedes’ EV transition resistance demonstrates persistent friction.
Source: Mercedes’ R&D and strategy departments opposed the plans, fearing a tech tie-up would damage Mercedes’ brand. Another concern was that Mercedes’ two largest owners, Chinese auto industry firms, may disturb shareholder unity.
Mercedes has experienced mixed sales in China but plans to invest more in R&D and accelerate electrification and digitalization.
Nio, China’s ninth-largest electric and hybrid car maker, has invested more in self-developed chip and battery technology.
Investors worry that the carmaker, which has lost money in a strong Chinese price battle, is taking on too much by entering smartphone markets.
In the three months ending June, Nio’s net loss increased to 6.12 billion yuan ($839.51 million). As of June 30, its cash and equivalents were 31.5 billion yuan, down from 42.3 billion in 2022.
