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NIO Extends Joint Manufacturing Agreement With JAC by 3 Years

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NIO Inc. NIO recently renewed its agreement with Jianghuai Automobile Group Co., Ltd. (“JAC”) and Jianglai Advanced Manufacturing Technology (Anhui) Co., Ltd. (Jianglai), for the joint manufacturing of NIO vehicles for another three years.

Currently, NIO’s vehicles are manufactured in a factory belonging to a Chinese state-owned automaker JAC in a manufacturing plant located in the industrial city of Hefei, where NIO is headquartered. Jianglai is a joint venture (JV) for operation management established by JAC and NIO, wherein NIO owns a 49% stake.

Per the new agreement, the JAC factory will continue to build the ES8, ES6, EC6, ET7 and potentially other NIO models in the pipeline for another three years, through May 2024. JAC has also agreed to expand the manufacturing capacity of the factory to 240,000 vehicles per year in order to cater to the rising demand for NIO vehicles. Reportedly, this will approximately double the production capacity available to NIO.

The onus of vehicle development and engineering, supply-chain management, manufacturing techniques, and quality management and assurance will be on NIO. Jianglai will be in charge of parts assembly and operation management.

The agreement also highlights various aspects of the fee arrangements between the companies. Moreover, the agreement enables NIO to benefit from economies of scale and advancement of manufacturing efficiency.

NIO – A Promising Name in the EV Industry

The electric vehicle (EV) industry has been booming for the past few years. While Tesla TSLA is considered the undisputed leader in the EV space, NIO, often dubbed as the Tesla of China, seems to be well positioned to cement a strong long-term foothold in the rapidly growing EV industry.

Encouraging EV market fundamentals are indeed the major catalyst for NIO’s long-term growth. The firm’s strong standing with the government of China offers it an edge in the massive China market. China’s intense push for EV vehicles is a major booster for NIO.

The premium ES6 and ES8 models are enhancing the Chinese EV maker’s prospects. The company’s EC6 model, deliveries of which began in September 2020, is also expected to buoy NIO’s prospects. In fact, NIO delivered 20,060 vehicles in the first quarter of 2021, including 4,516 ES8s, 8,088 ES6s and 7,456 EC6s, skyrocketing 422.7% year on year. NIO's EV models, which flaunt features that even Tesla models do not have, are clearly building a solid fan base for the company.

NIO’s battery swap technology is a game changer and provides an edge to the firm over its peers. The company claims that a battery pack can be replaced in its vehicles in about three minutes. The technology — which is part of NIO’s BAAS strategy — helps save time when charging an EV and alleviates range anxieties. Moreover, NIO's developed EV charging infrastructure is likely to further its growth trajectory over the long run.

Moreover, NIO has had an amazing run on the bourses in the past year, with its shares skyrocketing 764.9%, while its industry witnessed a rise of 35.8%.

NIO, peers of which include Li Auto LI and Xpeng Inc XPEV, currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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