Author: Zheng Senhong

“Driving BBA cars means having face” – this is a common belief among domestic consumers.

As the acceleration of electrification advances, the traditional luxury car market of BBA is being eaten away by domestic high-end electric cars. Some still question “Is it worth spending 500,000 yuan on domestic cars?”

However, BBA still has a strong influence in the fuel car market. There are still some consumers who firmly believe that buying BBA means they won’t suffer a loss, even when they face overpriced, poorly performing models with no cost-effectiveness. This persistence of believers only makes younger generations trust Chinese-branded cars more when it comes to electrification, intelligence, and family design at the same price point.

“It’s strange that young people are still immersed in the traditional value system created by BBA,” commented Liu Tao, CEO of Zhi-Ji Auto. New players in the industry are reshaping the evaluation criteria of cars in terms of intelligence and personalization. The definition of “luxury brand” is gradually shifting.

In the minds of younger generations of consumers, the level of vehicle intelligence is directly linked to “luxury”, becoming the primary consideration factor after driving range, safety and reliability, and price. This is what is known as “No intelligence, no car”.

When the definition of products shifts and leaders of new automakers have strong confidence in technology, products, and brand, their determination to challenge the traditional luxury brand status can be seen. Especially for NIO, which has already prepared to replace BMW, a leader in the industry, by changing the “BBA” pattern to “NBA”.

In the era of fuel cars, there were numerous car models competing below ¥300,000. However, if the price points go above ¥300,000, the top five spots on the luxury car list belonged to BBA. Whether it’s Japan’s renowned Lexus, America’s luxury Cadillac and Lincoln, or Nordic national treasure Volvo, they all come after the BBA trio.

In 2021, BMW continued to be the sales champion of the Chinese luxury car market for the third consecutive year, with a sales volume of 846,200 units.

According to the data of China Passenger Car Association, BMW 5 series and BMW 3 series held the first and second position of high-end sedan sales from January to August of 2021. BMW X3 has been maintaining a top-five position in the SUV sector.

These three models, as BMW’s main products, sold over 320,000 units this year, accounting for more than 80% of the automaker’s total sales in China.This sales volume is also the key to BMW’s lead over Mercedes-Benz and Audi, the first-line luxury brands in China.

As the biggest player in the domestic luxury market, BMW never thought that its biggest rival today is not Mercedes-Benz or Audi, with whom it has been fighting for years, but a new player that has been around for less than ten years.

“NIO ET7 is too cheap, it should sell better than BMW 5 Series, with monthly sales exceeding 10,000 units,” “After the launch of NIO ES7, it will aim to compete with domestically produced BMW X5L,” “NIO ET5’s sales will surpass those of BMW 3 Series in a year.”

Naming BMW’s main products one after another, NIO has completely broken away from the new energy circle and directly entered the traditional auto market.

Although it’s not just NIO who has set its sights on the BBA market, putting BBA models of the same level on site to “outdo” them is becoming the norm, including the test driving activities of Ideal ONE and WM Motor EX5.

However, NIO is the only one with such an obvious intent.

Taking ET5 as an example, which enters the mainstream midsize sedan market, its positioning focuses on differentiating the share of mainstream high-end brands in the sub-market of midsize sedans.

In terms of category:

NIO belongs to the new force of carmakers, focusing on the field of new energy vehicles.

BMW is a traditional luxury brand, with an absolute brand influence and product advantage in the field of fuel vehicles, and they do not interfere with each other.

But as domestic new energy vehicle market penetration continues to rise, the share of fuel vehicles is being rapidly “eroded” by new energy vehicles, and the two are now in a state of coexistence and mutual restraint.

According to data, in 2021, NIO accounted for 40.8% of the insurance registrations for high-end electric vehicles priced at more than RMB 300,000; Tesla ranked second, followed by BMW.

Another is the market performance of traditional luxury sedans, with the highest sales being the Mercedes-Benz E-Class and the Audi A4L, which both saw different degrees of decline in 2021.

This means that these shares are being replaced by emerging high-end new energy sedans.

In 2021, the cumulative sales of domestic luxury brand cars reached 2.6521 million units, a year-on-year increase of 4.9%. However, if Tesla’s cumulative sales of more than 480,000 units are excluded, the annual sales of traditional luxury brands would only be 2.168 million units, down 9.08% year on year.

“In the past two years, we have talked about BMW a lot,” said Qin Lihong. Comparing NIO to BMW is because when developing products, NIO has always used BMW as a benchmark, not to criticize, but to pay tribute to its rival.

From a product system perspective, BMW’s approach is to use sedans as its foundation, support its sales foundation, and then expand its product system with SUVs.The NIO ES series corresponds to the BMW X series, for example, the ES8 and ES6 correspond to the X5 and X3, respectively.

In contrast, the NIO ET series corresponds to the BMW numeric series, such as the ET7 and ET5 corresponding to the 5 Series and 3 Series, respectively.

“Excluding Audi and Mercedes-Benz due to the difference in NIO’s average invoiced price of over 100,000 RMB compared to Audi, and the difficulty in forming a direct competitive relationship. Additionally, the product structure of the Mercedes-Benz brand is the most complete in the entire automotive industry, which is what NIO needs to catch up with,” Qin Lihong added.

As of July this year, NIO’s terminal transaction price has remained at around 420,000 RMB. There is a high degree of product overlap with BMW and Mercedes-Benz, which are around 400,000 RMB.

NIO hopes to establish a benchmark for high-end luxury electric cars by breaking into the traditional luxury brand market with high transaction prices.

So, will the sales of ET5 exceed those of the BMW 3 Series within a year?

From January to July this year, the monthly sales of the BMW 3 Series exceeded 24,000 units, with an average monthly sales of 14,000 units.

Other new forces in the industry are short-term unsustainable except for the Ideal ONE in reaching this level of sales.

As planned, the ET5 is scheduled to begin delivery at the end of September this year. Li Bin revealed during NIO’s first-quarter earnings conference call this year that the ET5 has the largest order volume NIO has ever received in the same period, and during the second-quarter earnings conference call, he stated that the ET5 is expected to achieve a monthly delivery volume of over 10,000 units in December this year.

Based on the current order schedule of the ET5, if ordering begins now, delivery will need to be scheduled for June 2023.

This means, if NIO can achieve a delivery volume of over 10,000 units in December, then there are at least 70,000 unfilled orders in front of yours.

Although NIO has always emphasized that the pre-delivery order data does not have any substantial significance, at least it can be confirmed that the current order volume for ET5 is considerable.

As for the actual data, BMW 3 Series’ current sales maintain at around 15,000 units, which is the most stable and highest-selling model of BMW in the domestic market.

Although the outcome remains uncertain, NIO’s marketing tactics have at least produced initial results.# BMW 3 Series vs ET5: What Are the Differences in These Two Luxury Cars?

As the most well-known model of BMW, the 3 Series has always had the reputation of being the king of handling and the benchmark model for sporty attributes.

Moreover, NIO’s association with BMW’s 3 Series can bring more accurate positioning for the ET5 so as to save time and effort in creating product labels.

To a certain extent, by leveraging BMW’s brand influence and the product’s unique labels, NIO has indeed brought a marketing effect of top-level quality for the ET5 from its birth.

Where Are the Differences Between BMW and NIO’s Products?

For NIO, which has gradually established a foothold in the high-end pure electric vehicle market, challenging BMW multiple times has become a head-on collision between electric vehicles and fuel cars.

Unquestionably, BMW, which has been in the car-making industry for a century, is difficult for any newcomer to surpass in terms of technology and branding, not to mention second-tier luxury brands like Cadillac and Volvo, who have been in business for the same duration, who failed to shake BMW’s predominance in the domestic market.

How can NIO surpass BMW?

Taking specific car models as an example:

In terms of performance, the BMW 3 Series has always focused on sporty performance, and the fastest version could just squeeze into less than 5 seconds for accelerating to 100 km/h, which has been the leading level of the same level of fuel vehicles.

As for the NIO ET5, the twin-motor has a maximum output of 360 kW, a torque of 700 Nm, and can accelerate from 0 to 100 km/h in 4.3 seconds.

Regarding the interaction of intelligent cabins, ET5 has already explored AR and VR interaction methods inside the car, while the 14.9-inch central control screen of BMW 3 Series is just a decoration unless its ecosystem is extended through Car Play.

In terms of intelligent driving assistance, the computing power used for ET5’s driving assistance platform is 1016TOPS with a lidar and seven 8-million-pixel cameras. In comparison, BMW uses Mobileye chips with a computing power of only 2.5 TOPS, let alone high-end driving assistance capabilities such as OTA.

Moreover, BMW does not have 24K Fellow, nor does it possess a strong official community. This means that owning a BMW 3 Series would be nothing more than just buying a means of transportation, rather than becoming a part of a way of living.

This also explains ET5’s fatal attraction, which is not only a NIO but also incorporates a series of NIO owners’ experiences, including 5-minute battery swapping, human-to-human service, high-end identity recognition, and a strong sense of organizational belonging in the user community that cannot be replicated.

Compared to the BMW 3 Series, which strides into the traditional luxury circle, ET5 brings its luxury value by becoming a part of the “NIO universe”-an irreplaceable ecosystem that, unlike an empty title, entails an exclusive way of life.

Through technology and user systems, NIO conveys the standard of a good car as being able to develop into a composite lifestyle experience.

Why will the ET5 be considered a popular model after its release?

Because this is NIO’s lowest-priced model to date, coupled with the brand culture that NIO creates, everyone will unconsciously agree that NIO is worth buying.

It is reported that most orders for the ET5 are from first-time NIO buyers.

This is NIO’s completely different thinking direction from traditional car manufacturers: compared to other car companies simply selling cars, NIO is actually selling products + service systems.

For example, in terms of products, almost all brands will focus on one direction for their products, such as BMW for handling, Mercedes for luxury, and Volvo for safety.

On the contrary, what NIO can do is to balance performance, design, and luxury comfort for each detail.

Overall, NIO is not a very sharp and single-value automobile brand.

NIO’s service concept is to make users feel involved, accept user criticism, suggestions and ideas, which is not only a respect for technology and products but also a respect for emotions between people.

“Users saved NIO”. This is Li Bin’s sentiment after withstanding the most difficult time at NIO.

Few companies give credit to their users, and Li Bin’s statement represents his greatest respect for users and the brand spirit of NIO.

Currently, this is an important support for NIO’s move towards mainstream luxury.

BMW is just a symbol of traditional luxury

Among the three BBA giants, BMW is the most stable on the road to electrification.

In 2021, BMW’s global sales of new energy vehicles reached 328,000, accounting for 13% of total sales, achieving great success in both sales and profits.

This achievement is inseparable from BMW’s continuous research and development investment in related fields.

In 2021, BMW’s total R&D investment reached 6.299 billion Euros, a year-on-year increase of 10.7%, accounting for 6.2% of revenue.

And this year’s proportion will return to the long-term level of 5-5.5%, with the main areas of research being new vehicle architecture, electric products, digital products, and autonomous driving research.

But this does not mean that BMW has determined that this is the best time for a complete electrification transformation. BMW CEO Zipse once threw out a point of view at a roundtable meeting in New York: there is still a market for internal combustion engine vehicles.

And BMW’s real transformation time is in 2025, the product matrix plan called “New Generation.”

The “New Generation” series of models will mainly have three features:- Completely redesigned IT and software architecture;

• A brand new generation of high-performance electric powertrain systems and batteries;
• A brand new sustainable concept that runs through the entire vehicle lifecycle, including the most advanced driver assistance systems and highly automated driving technology.

Prior to this, BMW will use a modular, scalable intelligent vehicle platform to achieve concurrent production of traditional internal combustion engines, plug-in hybrid, and pure electric vehicle models on the production line, with real-time switching and adjustments based on production needs, until the arrival of “new generation” products.

During this transition period, BMW’s electrified products will be displayed on the same stage as traditional gasoline cars. The differentiation of the products, apart from the powertrain system, is only BMW’s imposed “selling point.”

It is precisely because of BMW’s ambiguous attitude towards transition that NIO’s goal to dominate the high-end automobile market in China and globally has become more profound.

BMW’s strategy is to have the best of both worlds – not willing to give up the gasoline car market, but also not willing to give up the transition to electrification.

But NIO’s direction is to further consume the share of the gasoline car market after achieving success in the new energy market.

Taking the ET5 as an example, the vehicle’s price almost reaches CNY 320,000 without any personalized configuration selected, even when choosing NIO’s BaaS battery rental plan, the price is still close to CNY 250,000.

For ordinary households, this is already a high budget for car purchases.

In the past, with a budget of around CNY 200,000, consumers’ car purchase needs were mainly focused on practicality.

But if the budget rises to CNY 300,000, it is difficult not to consider the brand premium brought by luxury brands, which is the balance between demand and value.

However, if consumers switch to new energy vehicles, they have to consider whether this budget can bring mainstream intelligent configurations, convenient battery swapping and power recovery modes, as well as the “Haidilao” service system.

This is the phenomenon of severe internal competition in the new energy vehicle market – downgrading and upgrading to the fullest is the norm, and consumers generally believe that at the same price point, new energy vehicles offer better value for money than gasoline cars.

As Li Bin said, “We will sell our electric vehicles at the same price as BBA’s gasoline cars, but our products have better service, performance, and competitiveness in terms of intelligence.””Highly skilled in pricing gasoline cars, but less confident when it comes to pricing electric vehicles in the Chinese market,” said BMW Greater China CEO, Jochen Goller, who appears particularly uncertain in the face of China’s new energy revolution.

In the era of gasoline cars, BBA (Mercedes-Benz, BMW, Audi) firmly grasped pricing power, maintaining a premium far beyond mainstream and Chinese brands. Apart from the use of more luxurious materials and higher quality workmanship, superior powertrain and handling, along with the brand’s extensive technology accumulation has brought recognition and imagination, which is the fundamental reason for their luxury vehicles.

In the age of electric vehicles, battery range and smart technology have become the core evaluation criteria. The consumer group has shifted from early adopters and geeks to the more mainstream range.

In summary, the difference in attitudes towards luxury cars between traditional and new generation consumers can be captured in one sentence:

Traditional consumers value the market recognition of brands, while new generation consumers value the luxury experience of the vehicles themselves. The consumer perception of “Buy once, earn forever” based on brand premium is undergoing rapid upgrades.

This difference has given new brands opportunities, but has also presented a challenge for old brands.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.