SHANGHAI (Reuters) – Electric vehicle maker Nio (NYSE:) has won approval to build a third plant in China that will bring its total approved production capacity to 1 million vehicles, almost matching Tesla’s (NASDAQ:) mighty Shanghai plant. – said three people who know the matter.
Tesla can produce 1.1 million vehicles a year at its Shanghai plant, the world’s largest manufacturing center.
The latest approval of the plant, with an annual capacity of 600,000 units, is a major win for Nio, given that China’s government planner is cautious about pursuing new electric vehicle production plans from 2022 amid concerns about excess capacity and slowing demand. Late last year, Nio received a license to manufacture cars.
Nio, China’s eighth-largest electric vehicle maker by sales, has begun construction of a third plant, known as F3, but it is not yet clear when mass production at that site will begin, the sources said, speaking on condition of anonymity. not yet publicly.
The F3 plant is located in the city of Huainan in the eastern province of Anhui and will primarily produce cars for the newly launched affordable car brand Nio Onvo, the sources added.
Nio told Reuters that construction of the third plant had already begun and that it would have a capacity of 100,000 units per shift. The expansion plan is aimed at meeting growing demand for vehicles from the Nio and Onvo brands, as well as the production of new vehicles, the electric vehicle maker said in a statement.
“The capacity of our existing plants will not be sufficient to meet market demand. Nio has no excess capacity,” the company added.
Nio did not respond to a question about whether the F3 plant’s capacity would later be increased to 600,000 units.
China’s Ministry of Industry and Information Technology and the National Development and Reform Commission did not respond to requests for comment.
Nio launched the Onvo brand in May when it also introduced the Onvo L60 SUV with a starting price of 219,900 yuan ($30,300), while the Tesla Model Y starts at 249,900 yuan in China.
Nio, like many of its peers, is seeking to expand its customer base and boost sales with lower-cost models amid fierce price competition in China that has forced it to cut its workforce and shelve long-term projects that won’t contribute to financial performance within three years. . years.
WHAT IS THE EXCESS CAPACITY?
Regulators’ decision to approve new electric vehicle capacity comes amid global concerns about excess capacity in China’s electric vehicle industry, which critics say is linked to government subsidies.
Chinese officials have also issued warnings about excess capacity in the past, but Beijing said in April this year that claims of excess capacity were baseless and that China’s electric vehicle production system was simply more competitive.
Nio founder and CEO William Lee also defends the electric vehicle industry, arguing that the problem of excess capacity is due to foreign brands, whose market share in China has fallen to 40% over the past few years from 60%, largely due to their uncompetitive products and services. .
“Attacking Chinese overcapacity industries is out of politics. Let’s count!” Li told reporters in May, adding that foreign brands will have more than 5 million units of idle annual capacity in China due to the loss of their market share.
Factory utilization rates at major Chinese plug-in hybrid and pure electric vehicle companies ranged from 33% to 111% in 2023 on a two-shift schedule, with BYD (SZ:) operating at 95% and Li Auto (NASDAQ:) at 95%. According to China Merchants Bank International, the increase was 106% due to the addition of additional shifts.
The data showed that Nio had the lowest rate at 33%.
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