Nio has received approval to construct a third factory in China, positioning itself to match Tesla’s production capacity in the country. This new facility would increase Nio’s approved production capacity to 1 million cars, nearly on par with Tesla’s massive Shanghai plant, according to sources familiar with the matter.
Tesla’s Shanghai plant currently has the capacity to produce 1.1 million vehicles annually, making it the company’s largest manufacturing hub globally. The approval for Nio’s new plant, with a planned capacity of 600,000 units per year, is seen as a significant achievement, especially considering China’s cautious approach to approving new EV production facilities since 2022.
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Nio, currently the eighth-largest EV maker in China by sales, has already commenced construction of the third plant, known as F3, in Huainan city, located in the eastern province of Anhui. The plant will primarily produce vehicles for Nio’s newly launched affordable car brand, Onvo.
Responding to inquiries, Nio confirmed that construction of the third plant has commenced and that it will initially have a capacity of 100,000 units on a one-shift basis. The company stated that the expansion aims to meet the growing demand for Nio- and Onvo-branded cars and to produce newly launched vehicles. It emphasized that there is no overcapacity issue, citing insufficient capacity in their existing plants to meet market demand.
See also: Nio’s Onvo L60 SUV Could Propel Monthly Sales Above 20,000 Units, Analysts Says
While Nio did not confirm whether the capacity of the F3 plant would be expanded to 600,000 units in the future, the move to expand production aligns with the company’s strategy to broaden its customer base and boost sales with more affordable models. This strategy comes in response to intense price competition in China’s EV market, which has led Nio to make adjustments such as trimming its workforce and deferring non-essential projects.
The approval for Nio’s third factory signifies a positive development for the Chinese EV industry, which has faced scrutiny over concerns of overcapacity. Despite these concerns, Chinese officials have defended the industry’s competitiveness, with Nio’s founder and CEO, William Li, arguing that foreign brands are facing overcapacity issues due to their uncompetitive products and services.
