SHANGHAI (Reuters) – Chinese electric vehicle maker Nio has signed a deal with its larger rival BYD to source batteries for a low-end electric vehicle brand that will compete with Tesla, three sources familiar with the matter said.
The deal is a win for BYD, which has sought to expand its revenue beyond selling electric vehicles under its own brand. It also shows the impact of relentless competition over the price of new electric vehicles in the Chinese market and over batteries, the largest single cost in a new vehicle.
Nio, founded as a start-up a decade ago, originally intended to produce batteries itself but abandoned those plans in December as the company shifted its focus to cutting costs to reduce losses.
Nio confirmed on Monday that its new brand will be called “Onvo” in English and “Ledao” in Chinese as it unveiled a website for the car. Nio, which targets the premium electric market and competes with the likes of Mercedes, has said the new Onvo L60 will compete with the Tesla Model Y.
Nio currently buys most of its batteries from industry leader CATL.
BYD will join CATL in supplying a smaller battery pack for a version of the new Onvo EV, two of the people said. Another Chinese battery maker, CALB, already a supplier to Nio, will supply the brand with a larger 85 kilowatt-hour battery pack, one of the people said.
When contacted by Reuters, Nio said the information was “inaccurate” and did not elaborate. CALB declined to comment, while CATL and BYD did not respond to requests for comment.
Reuters could not determine the scope of the Onvo battery contracts between Nio and the battery suppliers, nor any details on expected sales or production.
Chinese electric vehicle buyers have been more willing than car buyers in other markets to purchase shorter-range batteries in exchange for lower costs, partly due to the availability of battery-swapping stations, such as those operated by Nio, and charging locations.
BYD already supplies batteries to Tesla’s Berlin plant and state-owned Chinese car manufacturers such as FAW through its battery unit FinDreams Battery.
Most of BYD’s batteries are installed in its own electric vehicles. According to battery industry information provider Gaogong Industrial Institute, BYD sold only 5% of the batteries it produced to external customers in 2023.
BYD has renovated battery pack production lines at its Wuwei plant in east China’s Anhui province to supply Onvo, one of the people said.
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(Reporting by Zhuzhui Cui, Zhang Yan and Brenda Goh; Editing by Jacqueline Wong)