has launched the development of a mass-market sub-brand model in Hefei, which will be positioned below NIO's existing SUV and sedan models, according to local media.

(Image credit: CnEVPost)

NIO has launched the development of a sub-brand model for the mass market in Hefei, central China's Anhui province, according to a report by local media Auto-time on Wednesday.

The model will be positioned below NIO's existing SUV and sedan models and is slated for an annual production capacity of 60,000 units, the report said, without citing any sources.

The report focused on describing the novelty expressed by people in China's smaller cities and rural areas when they see electric cars driven back from big cities during the Chinese New Year holiday.

Residents of small counties in China, where new energy vehicles are rarely owned, expressed envy at the sight of such vehicles, according to the report.

The report did not provide more information about NIO's sub-brand, but said the company's sales channel is now penetrating third- and fourth-tier cities in regions including remote Inner Mongolia and Heilongjiang.

Last year, there were a lot of rumors about the NIO sub-brand, especially when JAC started a tender for the construction of a production line for JAC-NIO's 60,000-unit-per-year model codenamed "Gemini" at the end of April, and the topic was hotly discussed.

Autohome reported in late May last year that the car was positioned below the current NIO models and that "Gemini" might be a model code or project name, not the name of the final model to be launched.

Because of its positioning, the "Gemini" may be placed under the new brand, the report said.

However, in early June, NIO co-founder and president Qin Lihong said that "Gemini" is the code name for a new NIO product to be launched in 2022, without giving further details.

Last August 12, in a conference call after the announcement of the second-quarter earnings report, William Li, NIO's founder, chairman and CEO, finally confirmed that the company would launch a sub-brand.

NIO will enter the mass market through the new brand, and preparations for this have been accelerated and a core team has been established, Li said at the time.

The relationship between the NIO brand and the new brand is similar to that between Lexus and Toyota, Audi and Volkswagen, he said, adding that the brand is lower in price than , but the experience will surpass the latter.

NIO is currently the only local carmaker in China to have a firm foothold in the premium market, and deliveries are already holding steady at around 10,000 two per month.

Many now have high hopes for NIO's ET5 model, which will begin deliveries in September, as well as for a lower-priced sub-brand, expecting them to bring a strong new growth engine to the company.

While NIO's initial focus on the higher-end segment of the market gave the company a head start, since higher-end consumers in China were indeed among the earliest adopters of EVs, it is critical for the company to launch mass-market offerings in the next two years, Barclays analyst Jiong Shao said in a research note sent to investors on Tuesday.

Should NIO stay at the upper end of the market, inevitably it won't have as much data as competitors with a mass-market focus, and as a result far more cars on the road than NIO, according to the note.

"Indeed, NIO plans to launch several new models in the next 24 months and we believe most of these will be geared towards mass-market customers," the analyst said.