is in deep contact with , and the two sides are already at the end of the discussions about the cooperation on the former's sub-brand, local media reports said.

(Image credit: CnEVPost)

Nio's staff members have recently appeared frequently at BYD, and the two sides are in contact with business cooperation, according to a report by local media 36kr today.

Nio is in deep contact with BYD, and the two sides have entered the final stage of the discussions about the cooperation on the former's sub-brand, the report said, citing unnamed sources.

The report did not provide more information on the Nio sub-brand or how the partnership would be like, but suggested that the move comes at a time when several Chinese car companies are looking to diversify their battery suppliers.

BYD's blade battery has been favored by many leading car companies, not only 's cooperation with BYD is about to be finalized, Nio is also in deep contact with BYD, the sources said, according to the 36kr report.

The report mentioned that in the past few years, with the rapid growth of electric vehicles, global sourcing chiefs from nearly every car company have visited 's headquarters in Ningde, Fujian province, from around the world to lock in battery supplies.

But at a time when CATL is running low on capacity, it is placing tough demands on its partners.

When Nio was in financial trouble in 2019, CATL demanded that the carmaker pay it first before shipping. At one point, an Nio executive took out proof of property before convincing the company to ship, according to the report.

The report cited people familiar with the matter as saying that William Li, Nio's founder, chairman and CEO, had told the team that it could care less about CATL's offer of a few cents more per Wh of battery than other battery makers, and that the priority was to get a supply of batteries.

Assuming Nio's annual sales are 100,000 vehicles, and taking into account the spare batteries used for battery swap stations, the company needs at least more than 10 GWh of batteries, and the difference of a few cents per Wh battery means additional costs of up to hundreds of millions of yuan, according to the report.

But while Nio is CATL's second-largest customer after Tesla, Li said in the company's third-quarter earnings call that CATL was doing its best to secure battery supplies but that's still the ceiling on Nio's deliveries.

Price, capacity and power plays, almost every potential risk, are reasons for car companies to switch suppliers, the report said.

Nio confirmed it would launch a sub-brand to enter the mass market when it reported second-quarter earnings on August 12.

Nio will enter the mass market through the new brand, preparations for which have been accelerated and a core team has been established, Li said on the second-quarter earnings call.

"The Nio brand has a similar relationship with this new brand as Lexus has with Toyota and Audi has with Volkswagen," he said.

Li said Nio will launch the mass-market brand hoping to be lower in price than Tesla, but the experience will surpass the latter.

The average price of all Nio models currently on sale is more than RMB 400,000, much higher than Tesla.

CATL is China's largest power battery supplier, with 11.45 GWh installed in China in November and a 55 percent market share, data from the China Automotive Battery Innovation Alliance showed earlier this month.

BYD's installed power battery volume in November was 3.46 GWh, with a market share of 16.6 percent, ranking second only to CATL.

(Graphic by CnEVPost)

It's worth noting that it wouldn't be too much of a surprise if Nio ended up choosing BYD's batteries.

On October 21, cited a source close to BYD as saying that the company had received a 10 GWh order from Tesla for LFP batteries.

The standard range Model 3 and Model Y currently produced at Tesla's Shanghai plant use LFP batteries from CATL.

Tesla hinted that its US factory and future European factories will use LFP batteries for both the standard range Model 3 and Model Y, the person said, adding that BYD, which already has a factory in the US, has a better chance of winning.

BYD and Tesla have not confirmed nor denied the report.