In a significant development in the Chinese electric vehicle (EV) market, Nio (NYSE:NIO) has teamed up with BYD (OTC:BYDDF) (OTC:BYDDY) to procure batteries for a new, competitively-priced EV brand.

What Happened: This partnership marks a major milestone for BYD, which has been striving to expand its revenue streams beyond its own EV sales, Reuters reported on Tuesday. The collaboration also highlights the fierce competition in China’s EV market, especially in relation to pricing and battery costs, the most significant expense in a new vehicle.

Nio, which initially planned to produce batteries internally, has now shifted its strategy towards cost reduction to offset losses. The company announced on Monday that the new brand would be called “Onvo” and is intended to compete with Elon Musk‘s Tesla Model Y.

See Also: Tesla Semi With Walmart Branding Spotted: What’s Next For EV Giant’s Push Into Semi-Trucks?

Currently, Nio sources most of its batteries from industry leader CATL. Under the new agreement, BYD will join CATL in supplying a smaller battery pack for one version of the new Onvo EV. Another Chinese battery maker, CALB, will provide a larger battery pack of 85 kilowatt hours.

Why It Matters: This development comes amidst a major shift in China’s EV market. In March, Warren Buffett-backed BYD predicted a significant change in the new energy vehicle (NEV) landscape. This bullish outlook was shared at the China EV 100 Forum in Beijing, where key players outlined their strategies for the rapidly evolving market.

Earlier in the same month, BYD and Xiaomi initiated a race to make EVs more affordable than their gasoline counterparts. BYD, which surpassed Tesla as the largest EV manufacturer globally in the fourth quarter of 2023, is now focusing on competing with internal combustion engine vehicles rather than other EV makers.

In 2008, Berkshire invested around $230 million in BYD, obtaining 225 million shares and a 20.49% stake in Class H shares. Over time, it has reduced its stake and now holds approximately 87.6 million BYD H Shares, equivalent to a 7.98% stake.

Price Action: On Monday, BYDDF shares closed at $29.05 and BYDDY shares closed at $57.93, while Nio’s shares closed at $5.69 on the same day, with a slight decrease to 5.58 USD on May 7, 2024.

Read Next: ‘US Is Currently Sc***ed:’ Ex-Cruise CEO Calls For Manufacturing Makeover To Win Over Chinese Auto Rivals

Image via Shutterstock