Nio has held exploratory talks with Mercedes-Benz for a tie-up that would see the German automaker invest in the Chinese electric vehicle startup in exchange for technology, two people with direct knowledge of the matter said.
Nio's founder and chief executive William Li discussed the potential collaboration with Mercedes CEO Ola Kaellenius earlier this year, seeking an investment from the latter in exchange for loss-making Nio sharing its research and development capabilities with Mercedes, said the sources.
The talks did not reach a stage where details on the technology to be transferred and the potential financial investment were discussed, they said.
One of the sources said Nio approached Mercedes with the tie-up proposal, but cautioned that it was facing resistance within the German company which discussed it internally in recent weeks, and that it was highly likely it would not proceed.
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It was unclear by when a decision on the tie-up would be reached.
Nio, when contacted, denied it talked to Mercedes on a collaboration, calling it "untrue", without elaborating. Mercedes said in a separate response that there were no collaboration plans with Nio at the moment. The sources did not wish to be named as the matter is private.
The Nio-Mercedes talks highlight the trend of closer collaboration between legacy automakers and new upstarts as cash-strapped Chinese EV companies seek to survive a consolidating domestic industry by touting innovations that they hope to sell to established automakers.
Chinese EV companies may also be able to navigate potential trade barriers better by forging such tie-ups.
For their part, many of the incumbents are scrambling to reposition themselves to catch up with Tesla and Chinese companies as EV adoption scales up rapidly in markets globally.
Volkswagen has been a first mover, striking deals in July that would enable it to jointly develop new models for China, the world's biggest auto market, based on Xpeng's EV platforms and leverage SAIC Motor Corp's technologies for Audi.
And China's Leapmotor has approached foreign firms including India's steel-to-energy JSW Group, VW's Jetta brand and Stellantis, according to media reports and people familiar with the matter, after saying it would like to license out its EV platforms, battery and motor technology. Leapmotor has declined to comment on the matter.
By seeking tie-ups and investment from established automakers, China's EV startups are following a playbook from Tesla at a time when the EV industry leader was struggling to ramp up production. Elon Musk has credited a $50 million investment from the Mercedes group with saving Tesla in 2009.
Nio, whose investors include Chinese tech giant Tencent Holdings, has publicly called for more such tie-ups with established automakers. It currently does not have any.
"They [the legacy brands] have been too successful so that they are not agile in smart EV development. This is a challenge for any CEO who runs a company with hundreds of thousands of employees," Nio's Li told reporters at an event in September showcasing its self-developed technologies from batteries and chips to autonomous driving and smart manufacturing.
"Rather than spending so much money and time on your own, isn't it better to seek win-win via partnerships with EV startups?" he added.
The resistance being felt at Mercedes, however, reflects friction still at play in the adjustment to the EV shift.
The source said Mercedes' R&D and strategy teams were largely against the proposals, citing concerns that such a tech tie-up could undermine Mercedes' brand image. Another worry was that as Chinese auto sector entities were the two biggest single shareholders of Mercedes, it could upset shareholder harmony.
Mercedes has had a patchy sales record in China but is planning further investments in the market to expand its R&D team and accelerate innovations in electrification and digitalisation.
Nio, which ranks No.9 among manufacturers of electric and hybrid cars in China, has, in turn, been doubling down on investment in self-developed technologies for key components such as chips and batteries.
But its foray into areas such as smartphones has fueled concern among some investors that the automaker, which has seen its losses widen amid a fierce price war in China, is taking on too much.
Nio's net loss more than doubled to 6.12 billion yuan ($839.51 million) in the three months ended June. It had cash and equivalents totalling 31.5 billion yuan as of June 30, declining from 42.3 billion at the end of 2022.