Nio Renews Manufacturing Contract With China's State-Owned JAC, Doubling Capacity

Chinese electric vehicle manufacturer NIO Inc. NIO announced a renewal Monday of its manufacturing agreements with Jianghuai Automobile Group, or JAC, and Jianglai Advanced Manufacturing Technology.

JAC is a Chinese state-owned auto manufacturer that manufactures Nio's vehicles, including its ES8, ES6 and EC6 models, in the JAC-Nio manufacturing plant in Hefei. Jianglai is a joint venture between JAC and Nio, with the latter holding a 49% stake.

The renewed agreement that runs from May 2021 to May 2024 will require JAC to continue to manufacture the ES8, ES6, EC6, ET7 and potentially other Nio models in the pipeline.

JAC, according to Nio, has also agreed to expand annual production capacity to 240,000 units, based on 4,000 work hours per year. Nio's founder, chairman and CEO William Li hinted in April that he expects monthly production at the Hefei plant to reach 10,000 units. This would mean an estimated capacity of 120,000 units for the year. The expansion would therefore double production capacity.

Related Link: Nio, Tesla Battery Supplier CATL To Launch Sodium-Ion Battery In July

While Nio oversees vehicle development and engineering, supply chain management, manufacturing techniques, and quality management and assurance, Jianglai is responsible for parts assembly and operation management.

Why It's Important: Nio's sales momentum has accelerated ever since the COVID-19-induced softness in February 2020. The company is on track to roll out its fourth mass-produced model, the ET7, in the first quarter of 2022.

The company has also expanded into Norway recently. The vehicles sold in Norway will be manufactured at the Hefei plant.

Against the backdrop, the new manufacturing contract and the expansion in capacity assume importance.

"The new agreements allow NIO to benefit from economies of scale and manufacturing efficiency improvement in the future," Nio said in a statement.

In premarket trading Monday, Nio shares were rising 0.91% to $34.37.

Related Link: Nio's Deliveries Double In April Despite Supply Chain Disruptions And Factory Shutdown

Photo courtesy of Nio.