Business Informative & Scope Innovation

China’s Tesla Alternative

by Nisha K

In the race for electric vehicle dominance in China, NIO sets itself apart as one of the frontrunners to take the robust market of electric vehicles to the next level.

With an innovative founder on its side, NIO is poised to see growth in the future. Since its humble beginnings five years ago, entrepreneur William Li founded the China based startup which also makes electric racing vehicles, has a sole trained vision in mind, which is user experience. That motto has benefitted William, as NIO today is a global company with operations around the world and has an estimated value of approximately USD3.13 billion, according to Macrotrends.

The Shanghai based company’s rise to a billion-dollar business in just five years is an impressive feat. Despite lagging behind other car manufacturing giants such as Toyota, Honda and Fiat Chrysler Automobiles (FCAU), NIO delivered 3,318 vehicles to customers in December 2018. Next Big Future mentioned in April 2019 that NIO ES8, an upscale SUV, is touted as a domestic Chinese alternative to Tesla’s Model X.

Market for Electric Vehicles
Apart from Europe, the United States represents a mature market for electric vehicles (EV). City Labs cited that sales in October 2018 have dwindled slightly between 20 to 30 per cent. The country has found it tough to leverage the importance of clean energy on the impact it will bring to the environment following the usage of conventional combustion engines. Despite the discouraging sales growth, the US market is still the biggest market for the EV industry.

The situation’s quite different among the European countries, especially in Norway. EV sales have seen a steady rise on almost 58 per cent of all new cars sold in the Scandinavian country in March 2019. According to the National Public Radio report of EV sales, the figures reflect Norway’s desire to move away from fossil fuel vehicles with help from lucrative government incentives for owners of electric vehicles. Tesla’s Model 3 was the most popular model sold, amounting to almost 30 per cent of new passenger vehicle sales.

However, one of the fastest growing markets for EV is China. CleanTechnica states that China is on track to sell over two million EVs this year, from 1.1 million in 2018. The rapid rise in demand is partly due to the policies imposed by the China government which favours the growth of the EV industry. Consumer demand for electric vehicles over traditional combustion vehicles is another contributing factor. People just prefer new, superior technology with better value. It is projected that EV can at least take up half of the vehicle market share in China by 2025.

Getting Over Bumps
Despite NIO’s ES8 occupying the 19th spot due to sluggish sales in the opening quarter of 2019, the manufacturer is set to receive fresh investment from state-owned fund amounting to USD1.5 billion to set up a new entity, NIO China.

NIO China will operate the automaker’s main China business and open up yuan based fundraising channels for the company, according to a report published by Nikkei Asian Review. The injection of cash flow reflects China’s continued ambition in the electric vehicle industry, even as the government is slashing subsidies.

William introduced electric vehicles into the local market to solve the pollution issue the country was facing from the conventional engine which emits high levels of carbon into the atmosphere. The entrepreneur is so passionate about the concept of the ideal electric vehicle that he believes that user experience should be the focus when it comes to manufacturing EV cars.

Companies like NIO are pushing the envelope in reshaping China’s auto industry. Startups don’t have the safety net like some of the bigger players in the market. Acquiring market share might not work in the long run as companies will be making losses. William laments that in order to get the best out of both worlds which is manufacturing functional electric cars without compromising on the quality, one needs to look at a better way at manufacturing.

He added that NIO needs to be an excellent organiser on the manufacturing side but focus on developing the core technology and the user experience. ‘Manufacturing is only part of the value chain. I don’t think factory ownership matters. It’s like Apple has iPhones but it doesn’t make them, yet Apple has the best manufacturing capabilities’, says Qin Lihong, NIO’s co-founder, in an interview with Quartz during the Shanghai Auto Show.

The Future Outlook
With China’s government support for the EV market set to end in 2020, only the big players will be left standing after weathering the storm. Where does that leave the smaller companies or startups like NIO? According to Nikkei Asian Review it’s predicted that only 20 per cent of the manufacturers will survive at the end of 2020.

Across the globe US President Donald Trump has also threatened to cut back on EV subsidies, a move that’ll give a glimpse of how the industry can survive without the injection of funds. Apart from Europe, the lack of adequate charging bays or stations have affected the sales of EV vehicles over the years.

NIO on their part have been trying to push boundaries and recently announced their plans to increase their mobile charging stations to even their rivals Tesla as reported by Teslarati. With its slow sales growth in 2019, only time will tell how this billion-dollar startup will fare in the coming years.

Lastly, according to CleanTechnica, the top five EV in China are BYD Yuan EV, BAIC EU-Series, BYD e5, BYD Tang PHEV and Geely Emgrand EV.


Main photo by Paul Brennan from Pixabay.

12 Jun 2019
Last modified: 12 Jun 2019
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