(A covered Nio ET7 taken at the Shanghai auto show on April 19. Source: CnEVPost)

Nio has started the development of a new model in Hefei, where its China headquarters is based, positioned below its existing SUVs and sedan, 36kr said Wednesday, citing industry sources.

The report said Nio will upgrade its existing 70 kWh pack with a lithium iron phosphate battery, which is expected to give it a capacity of more than 75 kWh. The pack is scheduled for release in the fourth quarter of this year.

Lithium iron phosphate batteries are known for their low cost, so Nio could cut costs and hit the lower price range to compete in a broader market, the report said.

If Nio's battery leasing service BaaS is adopted, the starting price of the new Nio model can be reduced to RMB 276,000 yuan ($42,500), the report said.

If the lower-positioned model uses lithium iron phosphate batteries, Nio's price range is bound to further expand, thus reaching a broader user base.

It is unclear whether the lower-priced model mentioned in the report is the new sedan model previously hinted at by William Li, Nio's founder, chairman, and CEO.

On April 7, Nio's 100,000th vehicle rolled off the production line at its Hefei manufacturing base, marking an important milestone for the company.

Li said in a media interview after the commemorative ceremony that after the Nio ET7, Nio will definitely launch a second sedan product that will be more competitive than the current Tesla Model 3, which starts at RMB 249,900 yuan.

He did not disclose more details but said that Nio will build more factories in order to meet the production capacity of subsequent products.

Currently, Nio has three production models - ES8, ES6, and EC6, all of which are SUVs.

At Nio's annual event, Nio Day, on January 9 this year, Li unveiled the Nio ET7 sedan and said the model was available for pre-order.

The first production line body of the ET7 walked off the production line at the Hefei manufacturing base earlier this month, setting the stage for the vehicle's scheduled delivery in the first quarter of 2022.