Nio (NIO 7.95%) shares popped today after the Chinese electric vehicle (EV) maker updated investors on two fronts. Yesterday the company released its third-quarter earnings report, which was well received. But it gave the market even more reason to cheer today.

Nio's American depositary shares are up about 10% this week, including a jump of 5.7% today as of 1:25 p.m. ET.

Investors celebrate a spinoff

The rally in Nio shares began after the company reported its third-quarter results yesterday. While revenue of about $2.7 billion was slightly lower than expected, the company reported a much smaller loss than analysts thought it would. It also meaningfully improved that bottom line compared to the second quarter.

The company cited "ongoing vehicle cost reduction" as well as growing sales and higher selling prices for the positive results. But it was news that came out today that has investors feeling even more bullish on the stock. This morning Reuters reported that Nio plans to spin off its fledgling EV battery production unit.

Focus on turning a profit

Nio currently buys its batteries from Chinese battery maker Contemporary Amperex Technology Company (CATL). A spinoff of its own battery building company should help Nio significantly reduce costs and take a step closer to profitability. At least that's what investors are thinking today.

The report, citing people with knowledge of the matter, said the spin-off could occur as soon as this month. Though no valuation has been reported, it's the potential for the parent company's cost savings that has investors most excited today.

Nio also offers its EV buyers a subscription service for swapping out batteries at its more than 2,200 swap stations as an alternative to recharging drained batteries. The company is reportedly not including those swap stations in the spinoff.

The swap stations bring Nio a competitive advantage, and investors likely still see value in that technology, too. But a move to reduce costs and grow its battery making technology is what caught the attention of investors today. Those who believe in the EV market in general, particularly in China, could use this news as a reason to pick up shares after Nio stock has dropped by about 20% this year.