NIO, JAC to establish joint venture with NIO holding 49% of shares

March 04, 2021 ideaTechX

JAC Motor said Thursday it signed a letter of intent today with NIO Holdings Ltd. to set up a joint venture.

The company, to be located in Hefei, is tentatively named Jianglai Advanced Manufacturing Technology (Anhui) Co (江来先进制造技术(安徽)有限公司). The name takes the first character of JAC’s Chinese name and the second character of NIO’s Chinese name.

The company plans to have a registered capital of 500 million yuan ($77 million ), with JAC contributing 51 percent and NIO 49 percent.

The company’s board of directors will consist of five directors, three to be appointed by JAC and two by NIO. The chairman will be appointed by JAC and the vice chairman will be appointed by NIO.

The joint venture will build a new ecology of “advanced manufacturing + industrial internet” with automation, networking and platform, relying on industrial internet and manufacturing management experience, JAC said.

The purpose of the joint venture is to integrate the advantages of JAC and NIO in manufacturing, production operation, quality control, supply chain management, to serve the manufacturing operation of products scientifically, JAC said.

The business scope of the joint venture includes manufacturing, R&D and sales of electric vehicles and components; supply chain management; technical consulting and personnel training related to intelligent electric vehicles.

JAC emphasizes that the letter of intent for the joint venture is not legally binding and does not constitute an offer, and the two sides strive to agree and sign a formal agreement as soon as possible.

This is the latest move by NIO to try to enter the lower-priced EV market with a new brand, and it looks more promising than any previous moves.

In April 2017, NIO signed a strategic cooperation agreement with Changan Automobile, planning to set up a joint venture to develop new products together. The agreement at the time noted that the cooperation was different from JAC NIO’s OEM model.

On August 17, 2018, the joint venture company Changan NIO was officially settled in Nanjing Jiangning Development Zone, with William Li, founder, chairman, and CEO of NIO as chairman of Changan NIO and Li Wei, executive vice president of Changan Automobile, as vice chairman.

In December 2017, GAC Group and NIO signed a strategic cooperation agreement, and in April 2018, GAC NIO was officially established.

However, so far, Changan NIO has not yet presented any new vehicle plans or clear development plans.

NIO says its two joint ventures need to make their own way and it is just an investor

NIO’s shareholding in Changan NIO was reduced from 50% to 4.62% last year, while Changan’s shareholding has increased to 95.38%, which was interpreted as NIO’s plan to withdraw from Changan NIO.

In 2019, GAC NIO launched its first product, the HYCAN 007, with an expectation of “15,000 units by 2020”. However, when it began deliveries, GAC NIO lowered its forecast to 5,000 to 10,000 units.

In the first 11 months of 2020, the cumulative sales of HYCAN 007 were only 631 units, of which only 3 units were sold in November 2020.

In January, GAC NIO founder and CEO Liao Bing left the company. In March, he created a new new energy vehicle brand called Ziyou Auto.

On March 2, Li said creating a new brand to enter the mass market is a possibility; however, the NIO brand will not enter the mass market.

NIO made an attempt a few years ago, for example, with Guangzhou Auto Group and Changan Automobile to aim for the mass market. “Currently, we have reduced our share ratio from 45 percent to 5 percent in the companies,” he said during the company’s earnings conference call.

“We are actively looking at ways to enter the market dominated by Volkswagen more aggressively but this is a long-term strategy for us,” Li stated.

NIO earnings call: Creating new brand to enter mass market is a possibility

NIO, JAC to establish joint venture with NIO holding 49% of shares-CnEVPost

NIO, JAC to establish joint venture with NIO holding 49% of shares-CnEVPost

(The JAC NIO manufacturing base in Hefei, Anhui. Source: CnEVPost)