Profitability has been a major concern for Chinese electric vehicle (EV) company Nio (NYSE:NIO). According to Reuters, the company is now reportedly getting ready to spin off its battery manufacturing unit to help alleviate this issue. The publication cited two anonymous sources familiar with the matter.
According to the sources, Nio will accept outside capital investments toward the unit, which could be spun off by as soon as the end of 2023. The valuation of the unit is not yet known. The sources also stated that some top battery engineers would join the spun-off company, while others would transfer into other departments of the company.
“Nio hired these engineers in an effort to mass produce large cylindrical cells similar to Tesla’s 4680 in a planned plant in China’s eastern Anhui province in 2025 at the earliest,” said one of the sources, per Reuters.
NIO Stock: Nio Reportedly Planning to Spin Off Its Battery Unit
Nio’s planned battery plant is estimated to have an annual capacity of 40 gigawatt hours (GWh), which is enough to support 400,000 long-range EVs. The plant, along with intellectual property and various pieces of testing equipment, could be transferred to the spun-off entity.
Nio reported its third-quarter earnings yesterday, although CEO William Li did not provide any details on a potential spinoff. Still, Li added that “we have identified opportunities to optimize our organization, reduce costs and enhance efficiency.” The CEO also added that Nio would delay bringing battery production in house.
The company reported a net loss of 4.55 billion Chinese yuan, which improved by 24.8% quarter-over-quarter but increased by 10.8% year-over-year (YOY). Revenue tallied in at 19.06 billion yuan, marking an improvement of 46.6% YOY. Meanwhile, quarterly deliveries were 55,432 vehicles, up by 75.4% YOY.
Nio now seems to have a major focus on profitability instead of side projects, such as its smartphone. Last month, the company announced that it would lay off approximately 10% of its workforce while deferring or cutting off investments into long-term projects that wouldn’t have an effect on financial performance over the next three years.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
