, are making cars, and the Phone is a defensive strategy for Nio, William Li said.

(Image credit: CnEVPost)

Nio's (NYSE: NIO) second-generation phone has completed development and entered the manufacturing phase, said William Li, the electric vehicle (EV) maker's founder, chairman and CEO.

Li revealed the development at a gathering with vehicle owners in Wuhan, Hubei province, in central China, on March 17, saying that the release of the second-generation Nio Phone is still some time away.

Nio will launch one Nio Phone every year, rather than several, he said.

Commenting on Nio's investment of resources in developing phones despite losses, Li said it was not something to worry about.

"The point is that Huawei and Xiaomi are making cars. This is first a defensive strategy for Nio," he said.

"If a potential customer asks a salesperson in a store: Huawei's cars can connect with phones, can yours do that? How do you think our Fellow should answer?"

"In long-term competition, you need to have a baseline defense," Li said.

(Image from Nio app)

Now Nio vehicles can connect with other phones and there's its own Nio Phone that can provide a connectivity experience that's certainly the best, Li said.

Nio launched the first-generation Nio Phone on September 21, 2023, offering three versions starting at a starting price of RMB 6,499 ($900), RMB 6,899, and RMB 7,499, respectively.

Based on the one-a-year release pace, the second-generation Nio Phone could be a few months away from being officially launched.

On March 12, a report in local media outlet Lanjinger said that Nio started giving away free Nio Phones to customers who buy the 2024 models, but the entitlement is currently only available for March.

Nio's salespeople in some cities have recently used the free phone with car purchase as a selling point on social media platforms, including WeChat Video, CnEVPost' checks show.

The mainstream mid-to-high-end EV models currently on sale in China can connect to smartphones, allowing the phones to be used as car keys and to remotely unlock the cars and adjust the air conditioning, among other things.

The Nio Phone offers these same features, as well as a physical action button that allows the user to quickly activate more than 30 functions related to vehicle control for a better experience.

($1 = RMB 7.1978)

Nio gives free Nio Phones to customers buying 2024 models