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When two of China’s biggest EV manufacturers meet quite publicly – and with advanced notice – it is a cause of celebration as it underscores the probability of important developments materializing in the near future. It is for this reason that a visit by NIO’s delegation to BYD’s headquarters has been garnering so much attention recently.
Something brewing between BYD and NIO.
— Marcel Münch (@_mm85) August 25, 2022
As is evident from the tweet above, a banner displayed at the BYD building is attracting quite a lot of buzz on social media. The banner warmly welcomes a delegation by NIO, thereby raising the probability of an important announcement materializing imminently.
Bear in mind that NIO has long been working on launching an affordable sub-brand, which in the words of its CEO Li Bin, would be equivalent to the synergetic relationship that exists between Toyota and Lexus.
Critically, NIO is expected to tap BYD for a broad-based partnership on this affordable sub-brand. Of course, such a partnership makes economic sense since BYD’s LFP-based Blade batteries can last 1.2 kilometers or 745,645 miles. While CATL is still NIO’s primary battery supplier, it has been facing capacity issues recently amid growing global demand. Moreover, BYD already has a charging partnership with NIO for its EVs.
Since NIO relies quite heavily on its battery swap infrastructure as a distinctive selling point, it consistently maintains an outsized demand for batteries relative to its sales volume. This is because each battery swap station can store around 13 battery packs under optimal conditions, enabling a completely automated battery swap in under 3 minutes. Moreover, each such station can perform 312 completely automated battery swaps per day.
NIO had announced at its Power Day 2022 event back in July that it has now installed 1,011 battery swap stations, including 256 stations along Chinese highways. By 2025, the company expects to induct at least 4,000 such stations into its global network, thereby ensuring that 90 percent of its customers have at least one battery swap station within a 3-km radius of their residence.
Given this outsized demand for battery packs, it makes sense for NIO to tap BYD for its upcoming affordable sub-brand, and not rely solely on CATL. Of course, this is not the only avenue of potential cooperation between the two companies. BYD might have decided to enter the swappable battery arena. If so, it would make sense for the EV giant to tap NIO’s established battery swap network.
— Zheping Huang (@pingroma) August 25, 2022
Meanwhile, in what might appear as salvation for NIO’s US shareholders, it appears that the US and China are nearing an agreement on the thorny audit issue that has been plaguing US-listed Chinese ADRs for a while now. If an understanding is reached, it will preclude the possibility of such Chinese ADRs having to de-list from American exchanges.