JAC plans to sell the assets of two factories that make vehicles for Nio, which the latter may acquire and seek independent EV production qualification, local media said.
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Nio (NYSE: NIO) may acquire the assets of the factories of its vehicle manufacturing partner, Anhui Jianghuai Automobile Group (JAC), to move from contract manufacturing to independent production in a bid to seek greater self-reliance.
JAC last night released plans to transfer billions of RMB worth of factory assets, and although it did not mention Nio, local media outlet reported that the assets were Nio's F1 and F2 factories, while Nio said its vehicle manufacturing partner's move would not affect its operations.
Meanwhile, the report said Nio could acquire the assets JAC plans to transfer and seek its own EV production credentials.
JAC's plans
Shanghai-listed JAC said in an announcement yesterday that it plans to transfer some of its assets through a public listing involving fixed assets and construction in progress at its passenger car company's third plant, as well as buildings, equipment and assets at its Xinqiao plant in Anhui province.
The assets have a net book value of RMB 4.2 billion yuan ($570 million) and an evaluated value of about RMB 4.5 billion yuan, a move JAC said was aimed at optimizing its asset structure.
The assets planned to be sold were all acquired and constructed by JAC and have been put into use since 2018, with depreciation and amortization provided in accordance with accounting policies, and the assets are in normal operating condition, the announcement said.
The disposal of the assets will not affect JAC's normal production and operation and does not involve personnel arrangements, and if the transaction is successfully implemented, it will have a positive impact on the company's financial condition and operating results, the company said.
Nio responds
JAC's announcement made no mention of Nio, but local media outlet National Business Daily today cited people familiar with the matter as saying that JAC plans to transfer the two factories that make vehicles for Nio -- the Nio F1 and F2 factories.
In its response to the media outlet, Nio confirmed the information and said it would not affect its production and operations.
"The company is aware of the information from its partner and confirms that the move will not affect the company's next production and operations," Nio said.
The company will communicate when appropriate and will not comment on the matter until then, Nio said, according to National Business Daily.
A person familiar with the matter said Nio may acquire the assets that JAC plans to transfer and further pursue independent automobile production qualification, according to the report.
"If Nio can obtain independent production qualification as a result, it will be a major positive thing for it, which will benefit the company's long-term operation and efficiency," the person said.
China requires local carmakers to have qualifications issued by economic planner the National Development and Reform Commission (NDRC) to produce vehicles under their own brand names.
Nio, which has no such qualification, uses JAC's, and the vehicles are produced at two factories built in partnership with JAC, with Nio paying for contract manufacturing.
Nio's local counterpart, Xpeng (NYSE: XPEV), also initially took on contract production, with its first production vehicle, the G3, initially built by Haima Motor.
Xpeng's contract manufacturing agreement with Haima ended on December 31, 2021, after which Xpeng produced the vehicles using the manufacturing credentials it gained through an acquisition.
Li Auto (NASDAQ: LI) gained its own production credentials through an acquisition before it began mass production of its first model, the Li One.
Nio initially signed a manufacturing agreement with JAC in April 2016. In 2018, the F1 plant went into production.
On March 4, 2021, JAC said it signed a letter of intent with Nio to establish a joint venture, Jianglai Advanced Manufacturing Technology (Anhui) Co.
On March 27, 2021, Nio signed a deal with JAC to establish the joint venture company. The two will deepen their manufacturing collaboration to optimize operating costs, improve operational efficiency and management capabilities, Shen Feng, executive vice president of Nio, said at the time.
On April 29, 2021, Nio and the Anhui Hefei government jointly announced the start of construction of NeoPark. Nio's F2 factory is the first project of NeoPark, and the first model produced was the Nio ET5, which started deliveries at the end of September 2022.
On December 22, 2022, JAC said in an announcement that it planned to acquire some of the assets held by Nio Anhui for an estimated transaction price of RMB 1.704 billion. Neither JAC nor Nio provided an explanation for the move at the time.
($1 = RMB 7.3134)
JAC announcement on asset sale in Chinese:
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