Nio, a Chinese electric vehicle manufacturer, has collaborated with its larger competitor, BYD, to procure batteries for a new electric vehicle brand, according to three sources familiar with the situation. This partnership represents a strategic shift for BYD, aiming to expand its revenue sources beyond its existing electric vehicle brand. Additionally, it underscores the fierce competition in China's electric vehicle market, particularly regarding pricing, where batteries represent the most significant cost component in a vehicle.

In December, Nio shifted its strategy away from initially intending to manufacture batteries internally, opting instead to prioritize cost reduction. The company has officially announced the name of its new brand as "Onvo" in English and "Ledao" in Chinese, coinciding with the launch of a dedicated website for the vehicle. The upcoming Onvo L60 is anticipated to compete directly with Tesla's Model Y. Currently, Nio primarily procures its batteries from CATL, a leading player in the industry.

Sources suggest that BYD will team up with CATL to provide a smaller battery pack for a specific version of the new Onvo EV, while another Chinese battery manufacturer, CALB, will supply a larger 85-kilowatt-hour pack. When Reuters reached out for clarification, Nio contested the information, labeling it as "inaccurate." CALB chose not to comment, and requests for comment from CATL and BYD went unanswered.

Reuters said it was unable to determine the specific size of the battery contracts between Nio and its suppliers, nor were there any details available regarding projected sales or production figures. Chinese consumers of electric vehicles, especially those seeking cost savings, appreciate the availability of lower-range batteries and the convenience of battery swapping stations provided by companies like Nio, along with charging infrastructure.