Nio Reportedly Plans To Build New Battery Plant In China

Electric vehicle maker Nio Inc. NIO reportedly plans to build its first battery plant in China to produce big cylindrical cells similar to those used by Tesla Inc. TSLA.

What happened: Nio plans to build a plant with a yearly capacity of 40 gigawatt hours of cylindrical batteries, reported Reuters. The 40 GWh of batteries can power 400,000 long-range EVs, the report added, citing sources familiar with the matter.

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With the new plant, Nio also aims to reduce its dependence on battery supplier Contemporary Amperex Technology Co. Limited, or CATL, stated the report. CATL also supplies batteries to Tesla.

Nio did not respond to Benzinga‘s request for comment.

Nio has been instrumental in popularizing battery swapping as opposed to battery charging. Although Nio provides its users with home chargers, public charging, and mobile charging, its battery-swapping stations are a big hit. The company says it requires just three minutes to swap with a fully-charged battery.

Why is it important: In the past two years, prismatic batteries, with a rectangular shape, have gained popularity. These batteries can be packed more densely, leading to cost savings, stated the report.

However, proponents of cylindrical batteries, spearheaded by Elon Musk-led Tesla Inc. TSLA argue that the newer, larger format cylindrical cells are more cost-effective due to improvements in energy density, reported Reuters.

Batteries are the single-most expensive component in an electric vehicle. For Nio, the new plant could imply an attempt to cut production costs.

Price Action: Nio shares fell 3.9%, to $9.78, on Thursday, according to Benzinga Pro data.

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