According to an exclusive report by Reuters, citing two unnamed sources familiar with the matter, Chinese electric vehicle maker Nio (NYSE:NIO) plans to spin off its battery manufacturing unit as part of efforts by the company to turn profitable, reduce costs and improve efficiency.
The emerging battery division, headed by experienced manufacturing engineers previously employed at Apple (NASDAQ:AAPL) and Panasonic, plans to attract outside investors following its spin-off, potentially occurring by the year's end. The valuation for the division will be determined at a later stage.
With a market value of $12.4 billion, the company presently procures all its batteries from CATL and CALB Group.
The spin-off highlights Nio's drive to achieve profitability. Previously, its strategy involved in-house development and production of certain batteries, while outsourcing the rest to suppliers similar to Tesla's approach, as per one of the sources.
As part of the strategy, the top engineers from Nio's battery unit, some of whom have previous experience in quality and supplier management at Tesla's (TSLA.O) Nevada battery factory, will transition to the new firm. At the same time, some personnel will be integrated into other departments within Nio.
The automaker specifically recruited these engineers with the aim of achieving mass production of large cylindrical cells similar to Tesla's 4680 cells.
The targeted timeline involves a planned facility in China's eastern Anhui province, possibly operational by 2025 at the earliest.
The assets to be for spun off may include the proposed manufacturing plant, certain testing equipment, and intellectual property, according to one of the sources.
The projected plant was anticipated to boast an annual capacity capable of producing 40 gigawatt hours (GWh) of batteries. These batteries were estimated to provide power for approximately 400,000 long-range electric vehicles.
Shares of NIO are up 3.23% in pre-market trading on Wednesday.