Two of China's leading electric car makers said on Monday they would merge their battery charging subsidiaries, the latest sign of industry consolidation amid fierce competition in China's auto industry.
The transaction will merge the relevant departments of NIO and Zhejiang Geely Holding Group, and NIO will also acquire a 10% stake in another independent business of Geely. Just two weeks ago, another Chinese carmaker, Guangzhou Automobile Group, announced plans for a complex alliance with major manufacturer China FAW.
Dongfeng Motor and Changan Automobile, two of China's biggest automakers, were in talks to merge last year but failed to reach an agreement.
China's auto industry has huge overcapacity: it has enough auto factories to produce not only all the cars sold in China, but also all the production in the United States and Europe. But its domestic car market has been shrinking since 2017 as plummeting home prices have depressed spending by Chinese consumers.
"There are just too many automakers in China - mergers, acquisitions and reorganizations will be the trend in the future," said Zhang Xiang, a visiting professor at the Yellow River Institute of Science and Technology in Zhengzhou, China.
In the first eight months of this year, China's auto sales shrank by 20.8% compared with the same period in 2025. Automakers are trying to make up for this gap by increasing vehicle exports. China's car exports this year are expected to reach at least 10 million vehicles, much higher than the 1 million vehicles in 2020.
The European Union is concerned about the rapid decline of the European auto industry and has been considering whether to impose further restrictions on China's auto exports. Volkswagen, which has struggled to compete with Chinese imports, recently announced plans to lay off an additional 50,000 employees. Senior European officials are due to arrive in Beijing next week for trade talks.
Even as exports surge, the average capacity utilization rate at the average Chinese car factory is still just over half. Automakers in turn lowered selling prices below the cost of making cars, causing widespread losses among automakers and delays in payments to auto parts suppliers.
In Monday's deal, Geely agreed to merge its battery swap business into NIO's larger battery swap business and pay 640 million yuan in exchange for a 30% stake in the combined business, which plans to build 10,000 battery swap stations by 2030. Nio will also get a 10% stake in Geely's massive electric vehicle charging station business, which is expected to have 22,000 charging stations by the end of next year.
In addition, the two companies said they will coordinate the design of their respective vehicles in terms of battery swapping and charging.
Stephen Dyer, head of Asia's automotive business at global consulting firm Ai Ruibo, said that many Chinese automakers have been discussing coordinating battery swap designs for more than a decade.
The agreement between Geely and Nio, which together sold 1.3 million pure electric or plug-in hybrid vehicles in the first half of this year, represents a step toward standardizing battery manufacturing.
“Designing vehicles around battery swap standards requires a very high degree of intervention in the design,” Dai Jiahui said.
Battery swapping means that the driver parks the car next to a roadside facility, and the automatic swap cabin replaces the depleted battery with a fully charged battery. The whole process takes three to four minutes. Even with a very fast charging station, the time required to charge the battery to 80% is twice as long as replacing the battery. But in China and elsewhere, battery swapping is still far less popular than plug-in charging piles, and many auto analysts question whether battery swapping can catch up.
Industry leader BYD's domestic retail sales in China are down 34% so far this year, while Geely's sales have fallen by only half that amount. As a result, Geely has almost caught up with BYD in the Chinese market this year.
Guangzhou Automobile Group disclosed in a stock market filing on September 15 that it plans to place shares in China FAW, which is directly held by the Chinese central government. In exchange, GAC Group will acquire a stake in the long-term joint venture between FAW Group and Toyota. This transaction will make FAW Group the second largest shareholder of GAC Group, second only to the Guangzhou Municipal People's Government.
