2 Chinese EV companies seem to be ganging up on Elon Musk's Tesla

Elon Musk is facing fierce competition in China from EV upstarts like BYD and Nio. LEON NEAL/Getty Images

• EV company Nio is launching a new affordable EV brand in China. 
• Competitor BYD will reportedly supply batteries for the new range, which will compete with Tesla’s Model Y. 
• The alliance between the two companies will likely intensify pressure on Tesla in China.

Two of Tesla’s biggest rivals in China are joining forces in yet another blow to Elon Musk.

Local EV giant Nio is launching a new affordable EV brand that will compete directly with the Model Y in China — and it has reportedly turned to Tesla rival BYD to provide batteries for one of these new EVs, according to a Reuters report.

Three sources with knowledge of the matter told Reuters that BYD has agreed to provide batteries for the new mass-market brand called Onvo, which Nio confirmeded to Reuters on Monday.

BYD will reportedly provide a small battery pack for one version of the Onvo EV, with Chinese battery maker CALB supplying a larger 85-kilowatt-hour battery pack.

Nio disputed the report, describing it as “inaccurate” in comments to Reuters.

Business Insider contacted BYD and Nio for comment but didn’t immediately hear back.

Nio, known for its battery-swapping technology, is set to unveil the first Onvo vehicle at the end of the month and is also planning a second smaller EV that will sell in Europe for under $30,000, per Reuters.

It marks a strategy shift for the EV startup, which has previously focused on the premium market, and it comes as it faces fierce competition in China.

The alliance between Nio and BYD will likely intensify pressure on Elon Musk in China, where Tesla sales have slumped amid brutal competition for EVs.

Deliveries from Tesla’s Shanghai factory dropped 18% in April from a year ago, according to preliminary data from China’s Passenger Car Association reported by Bloomberg.

The move poses a fresh challenge to Musk as he embarks on a shake-up at Tesla.

The automaker is simultaneously trying to secure EV dominance in China and expand its autonomous driving operations — all while slashing its workforce with ongoing job cuts.

Musk secured a big win in a surprise trip to Beijing last month, sealing a vital deal with Chinese tech giant Baidu that moved the automaker closer to rolling out its Full Self-Driving technology in the country.

The Tesla CEO is now reportedly eyeing up plans to deploy the company’s forthcoming robotaxis, which the company plans to unveil in August, to China.

Once again, however, he is likely to face stiff competition from BYD and Nio, who are developing their own driving assistance software.

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