After announcing that it would spin off its battery arm in December, Nio (NYSE:NIO) has secured a new deal for batteries for its new brand of affordable vehicles, according to Reuters. The electric vehicle (EV) company had previously expressed its intentions to outsource battery manufacturing. Despite this deal, NIO stock is down about 2.5% today.

Nio has reportedly secured a battery deal with Chinese EV leader BYD (OTCMKTS:BYDDY) for its upcoming Onvo brand, or Ledao in Chinese. Onvo’s first vehicle, the L60, is expected to compete with Tesla’s (NASDAQ:TSLA) Model Y. The car is expected to be unveiled this month, with a launch later this year.

“One of the most important problems that has fundamentally not been solved nor attracted widespread attention is battery life,” Nio CEO William Li previously stated. “This is not only a problem that Nio needs to solve, but one that the whole industry must work together to solve.”

BYD, along with CATL and CALB, will provide the batteries for different versions of the EV. It’s worth mentioning that Nio noted that the BYD deal news was “inaccurate” when contacted by Reuters.

NIO Stock: Nio Reportedly Strikes Battery Deal With BYD

BYD has historically used most of the batteries it produces, but it appears the company is opening its doors to external customers. Last year, only 5% of its battery production was sold to external customers, such as Tesla. According to a Reuters source, BYD is already in the process of making changes to its battery production lines in preparation for Onvo.

Outsourcing batteries should help Nio achieve its huge goal of becoming profitable. However, that is likely still several years away.

During the fourth quarter, the company reported an adjusted net income loss of $688 million, bringing its yearly loss to $2.56 billion. Its GAAP EPS was a loss of $1.73. For 2024, analysts are forecasting an adjusted net income loss of $2.22 billion and a GAAP EPS loss of $1.16.

Flash forward to 2027, and Nio could have its first year of profitability. Analysts expect a GAAP EPS of 23 cents, which is expected to increase to 32 cents the following year.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.