NIO Inc. (NYSE: NIO) today announced that it has entered into manufacturing agreements with Jianghuai Automobile Group Co., Ltd., or JAC, and Jianglai Advanced Manufacturing Technology (Anhui) Co., Ltd., or Jianglai, regarding the joint manufacturing of NIO vehicles and related fee arrangements.
JAC is a major state-owned automobile manufacturer in China that currently manufactures the NIO vehicles in delivery, including the ES8, ES6 and EC6, in the Hefei JAC-NIO manufacturing plant designed and constructed for NIO vehicles.
Jianglai is a joint venture for operation management established by JAC and NIO where NIO holds 49% equity interests.
Pursuant to the joint manufacturing arrangement, from May 2021 to May 2024, JAC will continue to manufacture the ES8, ES6, EC6, ET7 and potentially other NIO models in the pipeline.
In addition, JAC will expand its annual production capacity to 240,000 units (calculated based on 4,000 work hours per year) in order to meet the growing demand for NIO vehicles.
NIO will be in charge of vehicle development and engineering, supply chain management, manufacturing techniques, and quality management and assurance. Jianglai will be responsible for parts assembly and operation management.
The fee arrangements consist of the following: (i) asset depreciation and amortization with regard to the assets JAC invested and to invest for the manufacture of NIO models as actually incurred, payable monthly and subject to adjustment annually; (ii) vehicle production and processing fees recorded on a per-vehicle basis, payable monthly and subject to adjustment annually; (iii) certain compensatory arrangement; (iv) relevant tax; and (v) purchase amount of certain production materials.
The new agreements allow NIO to benefit from economies of scale and manufacturing efficiency improvement in the future.