NIO Berlin 2022 release: ET7, EL7 and ET5 to start service in Germany, the Netherlands, Denmark and Sweden
On the evening of October 7th, local time in Berlin, Germany, NIO held a release event at the Tempodrom Berlin music hall with the theme “A New Horizon”, announcing the start of services in four countries: Germany, the Netherlands, Denmark and Sweden.
NIO’s three new models, ET7, EL7 and ET5, will start pre-orders in the above-mentioned four-country market through an innovative subscription model. Among them, ET7 will start delivery on October 16th, EL7 will start delivery in January 2023, and ET5 will start delivery in March 2023.
This is NIO’s further expansion in the European market after entering the Norwegian market last year. NIO will establish a complete operational system consisting of products and services in these four-country markets, building a user community centered on cars.
There is a small episode about why the ES7 is renamed as the EL7. In June of this year, Audi sued NIO in a Munich court, claiming that some of the models first offered in Europe by NIO would infringe on Audi’s trademark rights, and the dispute involved the ES6 and ES8 models. In order to avoid more disputes, the ES7 was renamed in Europe.
Regarding the renaming of ES7, according to the interpretation of the foreign media CNEVPOST, it may not be a big loss for NIO to rename ES7 as EL7 in Europe, because this is a model that was only delivered in China in August. However, it gives many people the feeling that NIO’s rise has seriously threatened traditional luxury car makers, including Audi.
“AutocarMax” followed up and browsed foreign media reports after the release event. There were not many obvious negative comments, except for the fact that many people were confused about why NIO only provides “subscription services”. In addition, the monthly subscription fee seems to be higher than people’s expectations.
To talk about this topic, first, some background information needs to be introduced.
Car subscription services are a type of auto finance. Of all the different ways to acquire the right to use/own a vehicle on the market, the mainstream ones are roughly divided into the following categories (the services provided and the duration of vehicle use are the usual practices, but not absolute):
Car subscription is a kind of service that falls between car rental and leasing. It is a relatively flexible and well-rounded service that includes license plate registration, insurance, maintenance, repair, roadside assistance, tire replacement and other services. Generally speaking, the longer the subscription time, the lower the monthly fee. Depending on the configuration, the price may also vary slightly.# Car Subscription – A New Way of Car Sales
Car subscription is a novel form of car sales. Audi was the first to practice subscription servicers. Volvo, Porsche, Lexus, BMW, Cadillac, Mercedes-Benz, Jaguar Land Rover, Lincoln, Polestar, Nissan, Toyota, Hyundai, Volkswagen, SAIC MG, Renault, Suzuki and other car companies have expanded related businesses.
Mercedes-Benz, BMW, and Ford have now canceled related businesses. The reason is not explained by the official, and some insiders believe that the bland demand is the main cause. Porsche has done well in operating this service.
Industry assessments are still sufficient to make people full of expectations. According to the predictions of consulting firms such as McKinsey and Boston Consulting Group (BCG), in the next 10 years, if we are optimistic, car subscription services may account for 40% of new car sales, while a conservative attitude is about 15%.
At present, from the depth of vehicle ownership, the breadth of brand scope, and the asset mode, the following types are the main categories of subscription suppliers in the market:
LeasePlan, which appears in the figure, is another partner except for NIO official.
In fact, at the beginning of this year, there was a huge global acquisition case in the relevant segmented field. ALD, the car leasing department of the French Industrial Bank, announced the acquisition of Dutch competitor LeasePlan for 4.9 billion euros.
LeasePlan is one of the largest car leasing companies in Europe, currently leasing about 1.9 million cars in 30 countries/regions. ALD manages about 1.7 million vehicles. The combination of the two is huge.
This kind of leasing/rental company is the best at doing such businesses. Taking LeasePlan as an example, it has experience in full-service leasing business and has gained a certain market share, occupying an advantageous position in the relevant industrial chain.
Subscription models have certain advantages in reducing barriers to the initial promotion of new brands, electric vehicles, and new models. “Subscription” models can help some consumers who like to try new things or have concerns about products try new models at low cost.
It can be said that this is a good trial for new brands, new driving methods, and new car models, such as NIO. This may be an important reason for NIO’s decision to only “subscribe” in the early stage and not sell after research and judgment.According to Li Bin, founder, chairman and CEO of NIO, there are reasons for NIO to make such a decision. In these four European countries, there is a tradition of “company cars” in the high-end car market (D, E, and F levels), and the proportion of high-end cars with subscription services is close to 60%. “The issue of usage rights is a mainstream issue that is related to tax systems and consumption habits, so this is the basis for our business decisions.”
Why is NIO not like this in the Norwegian market? Because the Norwegian tax system determines that a very small number of people have usage rights, possibly less than 10%. “So if we still only use subscriptions in Norway, it won’t work. This is an overall background.”
Another consideration for exploring this model is that “ultimately, the car itself will become a service, and we actually hope to simplify the user service interface. NIO has made many attempts over the years, such as buying cars and renting batteries, as well as the BaaS service that can be charged, exchanged, and upgraded. NIO has been trying various attempts.”
Currently, NIO offers short-term and long-term subscription services in the four European countries. The short-term subscription monthly fee for monthly subscriptions is as follows (with the corresponding decrease in monthly fee as the car age increases):
Long-term subscription prices are relatively lower, with subscription periods ranging from 12 to 60 months, and monthly fees as follows:
Regarding the monthly subscription price, many consumers have pointed out that it is similar to that of Mercedes-Benz and Porsche, and the price is expensive.
In response to this, Qin Lihong, co-founder and president of NIO, believes that “it is reasonable for us to be close to the prices of certain models of Porsche and Mercedes-Benz. This is the level of product power and value that NIO should have. Let’s get back to the essence of value.”
“Before the event yesterday, we talked with many users, potential users, media and partners who came to the event. Everyone has not completely adapted to this pricing system because it includes a lot of services. It is not a price that can be directly compared, and it may not be included in other brands. We have a one-price package.”
For example, NIO’s subscription service for users includes full insurance, maintenance, winter tires, battery swapping services, and door-to-door pick-up and delivery, as well as the flexible battery upgrade services provided in the future. Subscription users will also become members of NIO’s user community, participate in various activities held by NIO, and use NIO centers, etc.
“I think we will stick to our way of pricing and let everyone get used to our pricing system. Once everyone gets used to our pricing system, they will not be used to other price systems that do not include everything. They will find it troublesome or insincere. This is NIO’s real plan, which can also be seen as a ‘sunshine plot’,” Qin Lihong believes that this pricing is very sincere.
Li Bin added, “The subscription pricing system is much more complicated than simply selling cars. It not only considers the cost of the vehicle, but also the cost of funds and services. It is a very complex pricing mechanism. We will not lose money to gain market share. We still need a sustainable model. If you look at our subscription pricing, it basically takes into account various factors and still maintains a reasonable gross profit margin and sustainable management. That is the angle from which we approach it.”
For providers of such services, unlike traditional sales methods, it still requires the ability to manage the full life cycle of vehicle usage business, taking into account asset utilization rate, residual value assessment, etc. However, for evaluation of results, sales volume cannot be used as the sole measure. Evaluation criteria such as turnover rate, occupancy rate, and user satisfaction will be more important.
“In the end, it depends on the operating capability of the company, whether we can subscribe all of these cars out, assuming a subscription rate of 94%, 95%, or 96%. Of course, if the subscription rate is only 80%, then the price is very challenging. So, this is a very dynamic situation. Frankly speaking, we do not have too much production capacity to provide to Europe at present, so the scale of our fleet going out will not be too large.”
NIO only offering this type of transaction is inevitably a short-term measure. In the long run, the subscription model can only be a supplementary way of selling new cars. “This is our business choice,” Li Bin explained, “our team is still expanding, and our business system and other aspects need to be focused on. I just choose to focus on this (car subscription service).”
“When our entire system, team, including the battery swapping station and service system, becomes very mature, what’s difficult about adding a sales option?”
For NIO, what they are currently more concerned about is the complete output of their system.Li Bin emphasized that “when we go to Europe, everyone will still see that we are still in a complete system. Starting from Norway, we have been insisting on a very complete system of service output.”
“We still have NIO Houses, NIO Spaces, and battery swap stations in Europe, and we will also organize user activities and so on in the same way, which is very consistent with what we do in China,” added Qin Lihong.
In terms of sales and service network, NIO Center in Berlin is about to open. At the same time, NIO is building NIO Centers and NIO Spaces in cities such as Hamburg, Frankfurt, Dusseldorf, Amsterdam, Rotterdam, Copenhagen, Stockholm, and Gothenburg.
Currently, NIO has established an authorized service center network in major cities in five European countries: Norway, Germany, the Netherlands, Denmark, and Sweden. Users can also use the one-click service function on the NIO App European version, which was launched in August this year, to check vehicle data and make service appointments.
In terms of battery swapping, NIO will build a comprehensive charging system in four European markets. Currently, NIO has access to 380,000 charging piles in Europe and can directly access them with NIO NFC cards. NIO’s European version of the charging map has also been put into use.
By the end of 2022, NIO plans to build 20 battery swap stations in Europe, and this number is expected to reach 120 by the end of 2023. The Zusmarshausen battery swap station located between Munich and Stuttgart has been put into use, and the battery swap station in Berlin is about to be completed. By 2025, NIO plans to build 1000 battery swap stations in markets outside China (most of them in Europe).
As NIO’s European business advances, the NIO user community in Europe is gradually expanding. Currently, the NIO “User Advisor Group” in Europe has 270 members, who are making continuous suggestions in areas such as product localization experience, service quality, charging network, store experience, etc., helping NIO to continuously improve its products and services.
According to IHS data, from January to August 2022, the global sales of new energy passenger vehicles reached 7.83 million, of which China’s new energy passenger vehicles accounted for 38.6%; Europe is the second largest market, with a market share of 27.2%. Among them, the global sales of pure electric passenger vehicles reached 5.05 million, and China’s pure electric passenger vehicles accounted for 46.2% of the market share; Europe is the second-largest market in the world, with a market share of 21.8%.In Li Bin’s view, “from the perspective of the high-end market, China accounts for 40% of the world, while Europe and the United States together account for nearly 50%. If you want to make a high-end market, it’s difficult to gain competitiveness globally without good market performance in the United States and Europe. Therefore, there is no doubt that Europe and the United States markets will be our long-term direction.”
“Providing services to users in Germany, the Netherlands, Denmark and Sweden is an important step for NIO to achieve its 2025 plan and serve more users around the world,” Li Bin said.
Li Bin said, “Our innovative products, along with electric services and flexible subscription models, will bring a new look to the electric vehicle market in Europe. The deepening of our business in Europe marks a new chapter in NIO’s global development.”
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.