The new plant will have a capacity of up to 600,000 units per year, which will raise Nio's total capacity to 1 million units, according to Reuters.

Nio (NYSE: NIO) has won approval to build a third factory in China, which would boost its total capacity to 1 million vehicles, almost on par with Tesla's Shanghai plant, Reuters said today, citing three people familiar with the matter.

The latest approval for the plant, which has an annual capacity of 600,000 vehicles, is a major win for Nio, which was granted a license to build cars late last year, as China's state planning authorities have been wary of approving new electric vehicle production plans since 2022, the report said.

Nio has already begun construction of a third plant -- known as F3 -- but it is unclear when mass production from the site would begin, the sources said.

The F3 plant, located in the city of Huainan in China's eastern province of Anhui, will mainly produce cars for Nio's newly launched affordable car brand Onvo, the sources added.

Nio told Reuters that construction had begun on the third plant, which will have a capacity of 100,000 vehicles on a one-shift basis.

The expansion plan is aimed at meeting the growing demand for cars under the Nio and Onvo brands, as well as producing newly launched cars, the company said in a statement.

"The capacity of our existing plants won't be enough to meet market demand. There is no overcapacity with Nio," it added.

Nio did not acquire its own car-making credentials in its early years and its vehicles were produced by its partner, Anhui Jianghuai Automobile Group (JAC).

The two companies have spent the past few years building two factories in Hefei, Anhui province, dedicated to producing Nio's vehicles -- F1 and F2 -- with F1 going into production in 2018 and F2 in September 2022.

In December 2023, Nio entered China's Ministry of Industry and Information Technology's vehicle manufacturing enterprise credit information management system, meaning it will be able to produce vehicles under its own name.

On October 19, 2023, JAC released plans to transfer billions of yuan worth of factory assets, which consisted of three asset packages, with the F1 and F2 factories included.

The companies announced on December 5, 2023 that Nio would purchase the two plants in a deal valued at RMB 3.16 billion ($436 million).

With Nio's acquisition of JAC's factory assets and full control of the manufacturing process, production costs are expected to drop by about 10 percent, William Li, Nio's founder, chairman, and CEO, said in a third-quarter earnings call on December 5 last year.

On May 9, Nio's 500,000th mass-produced vehicle rolled off the assembly line at its F2 plant in Hefei's NeoPark.

A week later, on May 15, Nio officially launched the Onvo (Ledao in China) sub-brand, opening the way for multi-brand development. The company's management had previously referred to the new brand by the internal codename Alps.

Pre-sales of Onvo's first model, the L60, a crossover directly aimed at the Tesla Model Y, began on May 15, with a pre-sale price of RMB 219,900 including the battery.

The Onvo L60 will go on sale and begin deliveries in September, Nio said at the sub-brand's launch event.

($1 = RMB 7.2458)

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