NIO's years-long battery business strategy may finally be bearing fruit.

According to reports, NIO will develop and supply power batteries for British supercar brand McLaren, specifically for the latter's hybrid vehicle lineup. The battery packs will reportedly be based on NIO's proprietary 4680 large cylindrical battery technology, with small-scale production expected to commence next year.

source: NIO

Driven by Middle Eastern Backers

This collaboration has been facilitated by NIO's Middle Eastern financial backer, CYVN.

Reports indicate that in December of last year, CYVN Holdings acquired McLaren's automotive business and portions of its racing operations. CYVN is the Abu Dhabi-based investment institution that has twice made substantial investments in NIO and currently stands as the company's largest shareholder.

source: McLaren

Prior to acquiring McLaren's operations, CYVN also incubated British automotive startup Forseven. This company assembled a team of over 700 professionals from established automakers including Jaguar Land Rover, and has been quietly developing multiple luxury vehicle models.

In April of this year, under CYVN's orchestration, McLaren and Forseven completed a comprehensive merger, establishing the new holding entity McLaren Group Holdings with ambitions to expand into the luxury automotive market. Under the technology licensing agreement between Forseven and NIO, the merged entity will utilize NIO's intelligent electric vehicle platform and technological solutions for new vehicle development, while maintaining independent development of vehicle architecture.

Concurrently, NIO will leverage its partnership with Forseven to restart development of its 46105 large cylindrical battery and 120kWh battery pack. Previously, this battery pack was originally slated for integration into NIO's flagship sedan ET9, scheduled for market launch this year, but failed to materialize due to various complications.

Small-Scale Testing of 4680 Large Cylindrical Batteries

NIO's battery development team was established in 2021, announcing in September of that year a 75 kWh ternary iron-lithium battery developed in collaboration with CATL.

Subsequently, NIO's battery business investments and public communications have been prolific, including plans to invest 218 million yuan in R&D facilities and pilot production lines in Shanghai's Anting district. Market observers proclaimed at the time that "NIO's in-house battery manufacturing initiative has officially launched in full force."

The most aggressive move came in 2023, when NIO announced plans to advance large cylindrical battery mass production. At the "2023 NIO Battery Partner Forum" in Hefei, the company announced the launch of construction for "Phase One of NIO Battery Technology's Hefei Industrial Base," with planned capacity of 40GWh for large cylindrical battery production.

However, setbacks emerged quickly. That same year, 36Kr reported that due to operational conditions, R&D timeline adjustments, and various other factors, NIO had postponed equipment procurement for its Hefei battery facility. While the project remained active, it would proceed "according to revised production timelines."

In reality, since Tesla unveiled 4680 battery technology in September 2020, numerous battery manufacturers have followed suit with their own initiatives, yet large-scale production remains elusive. As a battery industry "outsider," NIO inevitably faced similar challenges and at one point sought external partnerships.

In September 2023, 36Kr reported that NIO was preparing to establish a joint venture with SVOLT Energy Technology for collaborative development of large cylindrical batteries.

Plans, however, failed to keep pace with reality. Shortly thereafter, NIO faced reports of layoffs and battery division divestiture, effectively bringing the large cylindrical project to a complete standstill.

Nearly two years later, through major shareholder CYVN's facilitation, NIO's large cylindrical project may be restarting. First, in NIO's collaboration with McLaren on the 4680 large cylindrical project, the initial deployment will be smaller battery packs of approximately 10kWh for McLaren's hybrid models, with very limited production volumes.

Second, the 46105 battery and 120kWh battery pack will be jointly developed by NIO and Forseven, with planned mass production by EVE Energy or Foxconn, though timelines remain uncertain.

Clearly, NIO is pursuing a two-pronged strategy: small-scale testing of 4680 large cylindrical batteries while actively developing 46-series cylindrical batteries and seeking external partnerships—a prudent approach.

Cash Reserves Sufficient for Four Quarters

For NIO, the most pressing priority is achieving profitability in the fourth quarter.

In 2024, NIO posted net losses of 22.4 billion yuan, marking three consecutive years of losses. Under these circumstances, this year represents a critical juncture for NIO—in many respects, a matter of corporate survival.

To this end, NIO Chairman and CEO William Li established targets during the 2024 annual earnings call: achieving fourth-quarter profitability, reaching 20% gross margins for the NIO brand by end-2025, and 15% gross margins for the ONVO brand.

However, investments in the first three quarters will continue unabated, whether for new vehicle launches or battery-swapping network expansion—all requiring capital deployment.

In Q1 this year, NIO posted net losses of 6.891 billion yuan, with debt-to-asset ratios rising to 92.55% and shareholder equity turning negative for the first time. As of Q1 end, NIO maintained cash reserves of 26 billion yuan. Based on Q1 loss rates, NIO's cash position could sustain operations for four quarters.

Therefore, fourth-quarter profitability is absolutely critical for NIO. Li previously stated: "If we cannot achieve profitability as scheduled in Q4, it will pose enormous challenges to the company's long-term development and business model, so we must achieve Q4 profitability."

According to media reports, NIO's Q4 profitability metrics include: combined monthly sales exceeding 50,000 units across NIO, ONVO, and Firefly brands; gross margins controlled at 17-18%; sales and administrative expense ratios around 10%; and R&D expense ratios at 7-8%.

To achieve this, NIO has been implementing efficiency improvements and cost reductions while strictly controlling investments. Reports indicate that in Q1 this year, before launching the new 5566 series (ET5, ET5T, ES6, EC6), NIO cleared existing 5566 inventory. Additionally, three new models—NIO ES8, ONVO L80, and ONVO L90—are scheduled for second-half launch.

Simultaneously, NIO began implementing a CBU (Cost-Based Unit) mechanism in March, establishing a cost committee to rigorously evaluate input-output ratios for each project. According to 21st Century Business Herald, following CBU implementation, of over 500 projects submitted in early 2025, only approximately half have successfully secured approval to date.

Reports also indicate that for the McLaren collaboration project, every expenditure requires personal approval from Tom Zeng (NIO's VP of Battery Systems), "regardless of amount."

Additionally, the cash-intensive battery-swapping business shows promising developments. In March, NIO reached a comprehensive partnership with CATL, with CATL advancing strategic investment of up to 2.5 billion yuan in NIO's energy services division, NIO Power. There are also reports that CATL is negotiating acquisition of controlling interest in NIO Power, while NIO plans to leverage its battery-swapping network to boost ONVO sales.

Whether these cost-reduction and expansion measures will prove effective may become clearer following the second-quarter earnings release.