EV Maker Set to Rival Tesla’s Production Capacity

In a significant development for the electric vehicle (EV) industry, Chinese EV maker Nio has secured approval to construct a third factory in China. This new facility, known as F3, will boost Nio’s total approved production capacity to an impressive 1 million cars annually, putting it nearly on par with Tesla’s giant Shanghai plant, according to Reuters.

According to three anonymous sources, the F3 plant, located in Huainan city, Anhui province, will primarily focus on producing vehicles for Nio’s recently launched affordable car brand, Onvo. The approval of this 600,000-unit annual capacity plant is a major achievement for Nio, considering China’s cautious approach to approving new EV production plans since 2022 due to concerns about overcapacity and slowing demand.

Nio, currently the eighth largest EV maker in China by sales, has already begun construction on the F3 plant. However, the timeline for the start of mass production remains unclear. In a statement to Reuters, Nio confirmed the construction of the third plant, stating that it would have an initial capacity of 100,000 units on a one-shift basis. The company emphasized that the expansion is necessary to meet the growing demand for Nio and Onvo-branded cars and to accommodate newly launched vehicles.

“The capacity of our existing plants won’t be enough to meet market demand. There is no overcapacity with Nio,” the statement read.

Addressing the Overcapacity Debate

The approval of Nio’s new factory comes amidst global concerns about overcapacity in China’s EV industry, which critics attribute to state-led subsidies. However, Chinese officials have dismissed these assertions as groundless, arguing that China’s EV production system is simply more competitive.

Nio’s founder and CEO, William Li, has also defended the EV industry, pointing out that the overcapacity issue lies with foreign brands, which have seen their market share in China drop from 60% to 40% in recent years due to uncompetitive products and services.

“Attacks on China’s industry with overcapacity is out of politics. Let’s do the math!” Li told reporters in May.

Data from China Merchants Bank International shows that factory utilization rates of major Chinese firms producing plug-in hybrids and pure EVs ranged from 33% to 111% in 2023 based on a double-shift schedule. While Nio logged the lowest rate at 33%, competitors like BYD and Li Auto operated at 95% and 106%, respectively, by adding additional shifts.

EVXL’s Take

Nio’s approval for a third factory marks a significant milestone in its growth trajectory and highlights the company’s ambition to compete with industry giants like Tesla. As the demand for EVs continues to rise, Nio’s expanded production capacity will position it to capture a larger share of the market, particularly with its new affordable Onvo brand.

Moreover, the debate surrounding overcapacity in China’s EV industry appears to be more nuanced than initially thought. While concerns persist, the competitiveness of Chinese EV makers and the declining market share of foreign brands suggest that the issue may be more complex than a simple case of oversupply.

As Nio forges ahead with its expansion plans, it will be interesting to observe how the company navigates the challenges and opportunities in the rapidly evolving EV landscape. With its increased production capacity and focus on affordable models, Nio is well-positioned to make a significant impact on the global EV market in the coming years.

Photo courtesy of Nico.