Mercedes, Nio deny talks on tech alliance

Mercedes-Benz and Chinese automaker Nio denied that they have held talks for a tie-up that would see the German automaker invest in the Chinese electric vehicle startup in exchange for technology.

Nio founder and CEO William Li discussed the potential collaboration with Mercedes CEO Ola Kallenius earlier this year, two people with direct knowledge of the matter told Reuters.

Nio was seeking an investment from Mercedes in exchange for loss-making Chinese automaker sharing its research and development capabilities with Mercedes, the sources said.

The talks did not reach a stage where details on the technology to be transferred and the potential financial investment were discussed, said the sources, who did not wish to be named as the matter is private.

One of the sources said the tie-up proposal faced resistance within Mercedes and that it was highly likely that the collaboration would not proceed.

Nio, when contacted, denied it talked to Mercedes on a tie-up, calling it "untrue," without elaborating.

Mercedes said in a separate response that while there were no collaboration plans with Nio, "Ola Kallenius is in an ongoing regular dialogue with various industry leaders and peers, including William Li."

Legacy automakers and Chinese EV companies are moving toward closer collaboration. Cash-strapped Chinese automakers are seeking 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, traditional automakers are scrambling to reposition themselves to catch up with Tesla and Chinese rivals as EV adoption scales up rapidly in markets globally.

Volkswagen Group has been a first mover, striking deals in July that would enable it to jointly develop new models for China, based on Xpeng's EV platforms and leverage SAIC's technologies for Audi.

China's Leapmotor has approached foreign companies 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.

Tesla example

By seeking tie-ups and investment from established automakers, China's EV startups are following a play book from Tesla at a time when Tesla 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, 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, is it not better to seek win-win via partnerships with EV startups?" he added.

Mercedes image concerns

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 digitalization.

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 totaling 31.5 billion yuan as of June 30, declining from 42.3 billion at the end of 2022.