(Yicai Global) May 26 -- Nio has plans for a CNY218.5 million (USD32.5 million) lithium-ion battery project in Shanghai to help lower the Chinese electric carmaker’s excessive dependence on supplies from Contemporary Amperex Technology.

The electric vehicle startup intends to build the project in Jiading district, according to a notice posted on the city’s environmental information disclosure platform on May 23. It will have 31 research and development labs and pilot production lines, and construction is expected to begin between August and October.

Pilot production will be used for follow-up in-depth development and to explore possible future mass production, the notice said. That suggests Nio is gearing up to develop and make power batteries for its own car models by itself, industry insiders said.

The Shanghai-based company did not immediately respond to a request for comment.

Nio’s current market models use power cells supplied by China’s CATL, a global leader in lithium-ion batteries. The smart automaker was CATL’s second-largest client last year after Tesla, figures from the Starting Point Institute of Research showed.

Reliance on one battery supplier is too risky for electric automakers, according to Yu Qingjiao, secretary general of the Zhongguancun New Battery Technology Innovation Alliance. And as the market expands, EV producers also do not want to hand their hard-earned money to suppliers, while getting into battery production themselves will help carmakers contest suppliers’ pricing power, he said.

With a more than 50 percent market share in China, CATL has excessive pricing power in the home market, and that is not what vehicle manufacturers want to see, said auto sector researcher Zhang Xiang. It is also impossible for Ningde-based CATL to meet the needs of so many car producers, he added.

CATL’s share of the domestic market has topped 50 percent for two straight years, per data from the China Automotive Power Battery Industry Innovation Alliance.

Nio sold 91,400 EVs last year, a 109 percent increase on 2020. It sold 25,700 in the first quarter of this year, up 29 percent from a year earlier.

Editors: Tang Shihua, Peter Thomas