NIO may consider bidding for two manufacturing plants in the eastern Chinese city of Hefei put up for sale by partner Anhui Jianghuai Automobile Group Co (JAC) on Oct. 20, reportedly in an effort to exercise more control over its production process.
Why it matters: Acquiring existing plants is one of the easiest ways for electric vehicle companies to obtain a production license in China, as NIO rival Li Auto did previously. The move could be a big positive for NIO in improving operational efficiency over the long term, a person with knowledge of the matter told the Chinese financial media outlet National Business Daily (NBD) on Oct. 20.
- In 2020, Xpeng Motors, another competitor to NIO, announced that it had obtained a production license for its fully-owned factory in the southern Chinese city of Zhaoqing. This achievement followed years of collaboration with Haima Automobile, a former partner of Japan’s Mazda, to manufacture EVs, Reuters reported.
Details: State-owned JAC said on Oct. 20 that it plans to look for buyers publicly for part of its assets under its third factory and its Xinqiao plant for a combined value of approximately RMB 4.5 billion ($610 million).
- This would represent a premium of nearly 6.8% to its book value and include some inventory, equipment, construction, and land use rights that belong to its passenger vehicle subsidiary, according to a regulatory filing (in Chinese).
- The two factories that JAC referred to were in fact the two advanced manufacturing bases established by the automaker for EV production with NIO, according to the person who spoke with NBD and noted the latter’s likely intention to reach a deal.
- A NIO spokesperson neither confirmed nor denied the news when contacted by TechNode on Monday, saying that the company will share more details on relevant matters “when the time is right” and that the decision by its partner has no impact on NIO’s production and operations.
Context: JAC, also a manufacturing partner for Volkswagen in China, completed construction of the so-called first advanced manufacturing base, or the F1 plant, with NIO in the Shushan district of Hefei in late 2017. The facility, which had an initial annual production capacity of 120,000 vehicles, was built after the two companies reached an outsourcing agreement in mid-2016.
- New York- and Hong Kong-listed NIO and JAC began operating their second facility, or the F2 plant, in the Xinqiao Science and Technology Innovation Demonstration Zone in the city last September.
- The annual capacity of each of the F1 and the F2 plants can be increased to 300,000 vehicles, and the agreements for manufacturing in the two plants are set to expire in May 2024 and September 2025 respectively, according to NIO’s annual report.