At the 2023 NIO Battery Partner Forum held on February 24, the Chinese electric vehicle maker announced the commencement of construction of the first phase of its subsidiary industrial base in Hefei, Anhui Province. On the same day, Reuters reported NIO‘s plans to produce 4680 cylindrical batteries similar to Tesla’s. The battery plant will support an estimated annual production capacity of 40GWh, which can provide power for 400,000 electric vehicles.
According to media outlet CBEA, NIO batteries were scheduled to go into production in 2025. However, with the start of construction of the first phase of the industrial base in Hefei, mass production may be achieved earlier.
The construction of a battery factory will help NIO reduce its dependence on CATL, its largest battery supplier. In January this year, NIO and CATL signed a five-year strategic partnership agreement. Just one week before NIO announced that it would build its own battery factory, CATL implemented reduced rates with fixed purchasing volume agreements with select automobile companies.
NIO has invested deeply in battery research since last year. In May 2022, NIO planned to invest about 218 million yuan ($31 million) to lease an industrial plant in Jiading District, Shanghai for battery research and development and trial production. In October of the same year, NIO Battery Technology (Anhui) Co., Ltd. was established, with a business scope covering battery manufacturing and sales.
William Li, founder of NIO, said in June of last year that Alpine, a sub-brand of NIO, will be equipped with batteries developed in-house. The production of 800V high-voltage battery packs will start in the second half of 2024. NIO currently employs 1,000 battery team members.
Jiemian News reported that, according to Zhang Yichao, a strategy consulting partner at EY-Parthenon, batteries developed in-house by automobile companies need to reach 50GWh capacity to maintain breakeven. If each vehicle is equipped with a 100KWh power battery pack, at least 500,000 units of sales are needed to breakeven. With a sales target of 200,000 vehicles this year, NIO is far from that goal.
Unlike NIO, most automobile companies in China look to invest in battery companies or set up joint ventures. Last year, Li Auto invested 400 million yuan ($57 million) in Sunwoda, a second-tier battery manufacturer. The latest L8 Air model is equipped with Sunwoda batteries. Changan Automobile and CATL jointly funded the establishment of a battery company in December last year.
“Most auto companies are currently unable to reach the battery manufacturing capacity of 50GWh. In the short term, in-house battery manufacturing is a loss-generating business.” Zhang added, “With the increase in sales volume and investments in multiple brands, there is still a high possibility for automakers to make a profit in this sector in the long run.”