Nio is reportedly contemplating the spin-off of its battery manufacturing unit as part of a strategic move to achieve profitability, streamline operations, and cut costs, according to sources familiar with the matter cited in a Reuters report today.
The spin-off initiative may materialize by the end of this year, following which the battery unit intends to attract external investors, with the valuation set to be determined at a later stage, as per the report.
This development marks a shift in Nio’s previous strategy, where the company had initially planned to independently develop and manufacture some of its batteries while outsourcing the production of others to external suppliers, as revealed by an insider.
Under the proposed plan, key engineers from Nio’s battery division are expected to transition to the new standalone company, while some employees will be integrated into Nio’s other divisions.
Nio had previously hired engineers for the mass production of large cylindrical batteries, resembling Tesla’s 4680, in a planned facility in China’s Anhui province by 2025 at the earliest, one of the sources disclosed.
Assets slated for divestiture could include the planned factory, specific test equipment, and intellectual property, according to an insider.
During a recent Nio earnings call, company founder, chairman, and CEO William Li articulated that in-house battery manufacturing was not anticipated to contribute to improved gross margins within the next three years. However, Li did not elaborate on alternative approaches the company plans to adopt.
The restructuring is expected to enable Nio to focus on core technologies while continuing to invest in battery cells, materials, and packs. The company remains committed to maintaining a competitive edge in the rapidly evolving EV market.
Nio has a history of aspiring to develop and manufacture crucial components internally, with batteries being a focal point. In June 2022, Li confirmed the company’s intention to develop its own batteries during an earnings call.
Earlier reports from February indicated Nio’s plans to construct its first battery factory, with an annual capacity of 40 GWh, capable of powering around 400,000 long-range electric vehicles. However, recent reports in July suggested a slowdown in Nio’s battery development plans, with equipment purchases for the plant temporarily halted.
As part of a broader organizational and business optimization plan announced on November 3, Nio aims to reduce around 10 percent of its workforce. Subsequent reports have indicated that various business units, particularly the battery and smartphone divisions, may undergo restructuring.
The potential spin-off of Nio’s battery manufacturing unit aligns with the company’s dynamic approach to adapt to market conditions and position itself strategically for sustained growth.
