Electric vehicle manufacturer NIO has received approval to build a third factory in China, bringing its total approved production capacity to 1 million units, nearly on par with Tesla's massive Shanghai factory, according to three sources familiar with the matter.
Tesla's Shanghai factory is its largest manufacturing hub globally, capable of producing 1.1 million vehicles annually.
Since 2022, China's state planners have been cautious about new electric vehicle production plans, fearing overcapacity and slowing demand. Therefore, the approval of this factory with an annual capacity of 600,000 units is a significant victory for NIO. NIO obtained its manufacturing license at the end of last year.
NIO, the eighth largest electric vehicle manufacturer in China, has begun construction on its third factory, known as F3, but it is unclear when mass production will commence. Since the matter is not yet public, the sources requested anonymity.
The F3 factory is located in Huainan City in eastern Anhui Province and will mainly produce vehicles for NIO's newly launched affordable car brand, Onvo.
NIO told Reuters that construction of the third factory has begun, with a capacity of 100,000 units under a single-shift system. The expansion plan aims to meet the growing demand for NIO and Onvo brand vehicles and to produce newly launched vehicles, NIO said in a statement.
"The capacity of our existing factories is insufficient to meet market demand, and there is no problem of overcapacity at NIO," NIO added.
When asked if the capacity of the F3 factory would be expanded to 600,000 units, NIO did not respond.
The Chinese Ministry of Industry and Information Technology and the National Development and Reform Commission did not respond to requests for comment.
In May, NIO launched the Onvo brand and unveiled the Onvo L60 SUV, with a starting price of 219,900 yuan (approximately $30,300), while Tesla's Model Y starts at 249,900 yuan in China.
Like many of its peers, NIO is expanding its customer base and increasing sales through more affordable models. Facing fierce price competition in China, NIO has been forced to lay off employees and delay long-term projects that will not contribute to financial performance within three years.
