Nio Inc (NYSE: NIO) is pressing ahead with its in-house large cylindrical batteries, with a very small batch of cells expected to roll off production lines by year-end, marking progress for a project that has faced repeated delays.

The cells will be manufactured by Eve Energy (SZSE: 300014) and Gotion High-tech (SZSE: 002074), though mass production remains difficult in the near term, battery industry media outlet Jipian Lab reported on Monday.

Nio is also increasing its purchases of prismatic batteries from CATL (HKEX: 3750), with its Onvo and Firefly brands both now using the supplier's batteries, the report noted.

The arrangement continues Nio's strategy of retaining core battery research and development while outsourcing manufacturing, advancing its own technology while relying on external suppliers to support vehicle deliveries.

Nio founder, chairman and CEO William Li said in a media interview in September that the company had invested more than 2 billion yuan ($298 million) in battery research and development, Jipian Lab noted.

Li said at the time that Nio continued to invest heavily, focusing its in-house development on long-life large cylindrical cells under a model combining internal R&D with contract manufacturing.

Nio's battery strategy has shifted over the past few years. In 2023, the company pursued a battery factory with a planned annual capacity of 40 GWh, but subsequently slowed equipment purchases and delayed mass production.

During an earnings call in December 2023, Li said the company would continue researching cells, materials and battery packs, but would outsource production to reduce costs.

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