NIO Brings Its Full-Service System to Germany, Will Mercedes and BMW Be Afraid?

By Tian Hui, Edited by Wang Lingfang

On the evening of October 7th Berlin time, at the NIO Berlin 2022 event, NIO announced that it would start offering services in four EU countries: Germany, the Netherlands, Denmark, and Sweden.

NIO will bring the three new models ET7, EL7 (ES7 in China), and ET5 to the four countries with an innovative subscription model. Specifically, ET7 will start delivery on October 16th, EL7 (ES7) will start delivery in January 2023, and ET5 will start delivery in March 2023.

Under NIO’s subscription model, customers can pay a monthly fee to use the vehicles and have access to NIO’s full-service system, which includes battery swap, worry-free service, and insurance. In fact, besides charging fees, the subscription model covers all related costs.

In addition to the subscription model, NIO will fully replicate its service system in China, including NIO House, NIO Life, user community, and BaaS battery swap in Europe.

That being said, NIO will not directly sell cars in the four EU countries, at least not for now. However, NIO has entered non-EU countries like Norway under a single-car sales model.

Therefore, it is clear that NIO has a targeted marketing strategy.

NIO has ambitious plans for expansion in the European market. NIO’s founder and chairman, William Li, stated that NIO plans to deploy 120 battery swap stations across Europe by 2023, indicating a massive investment.

However, NIO’s chosen EU countries are not easy targets. Germany and Sweden are traditional luxury car powerhouses, and brands like Mercedes-Benz, BMW, Porsche, and Volvo are world-renowned. Can NIO, as a start-up brand, leverage this experience in the Chinese market to win a place in Europe?

Subscription Is NIO’s Innovation in Europe, Differing from the European Car Leasing Model

NIO’s subscription model is not the same as the European car leasing model.

NIO has innovated on the European car leasing model.

Car leasing is popular in Europe but not favored by Chinese consumers, which is related to local car culture, traditions, and tax systems.As part of its welfare program, some companies in Europe offer “company cars” to eligible employees for their work and personal use. However, in some countries, “company cars” are considered as additional benefits given by the company to its employees and are therefore subject to tax. To avoid this, companies choose to lease cars for their employees to use, rather than purchasing them outright.

This leasing model, known as the subscription model, is one of the most common sales models in the European and American automobile markets, and is also the basis for NIO’s subscription model.

During the communication session after the press conference, William Li said, “In these four European countries, nearly 60% of the high-end car market in the D, E, and F segments is made up of high-end car subscriptions. This is related to tax policies and consumer habits, and is the basis for our entire business decision-making.”

In the European market of the European Union’s four countries, NIO users will obtain car services through the subscription model, with subscription periods ranging from one month to 60 months, and the longer the subscription period, the lower the monthly rent.

By adopting the subscription model, NIO users not only have the right to use the vehicle, but also have access to NIO’s full range of services, including comprehensive insurance, maintenance, battery replacement, and even a set of winter tires. NIO will also provide battery upgrade services in the future.

Additionally, NIO’s European subscription users can become members of the NIO user community, just like Chinese users, and participate in various activities organized by NIO, such as using NIO Houses.

As a comparison, the traditional leasing model in the European Union’s four countries offers certain advantages in terms of vehicle rental, but lags behind NIO in terms of service, such as insurance and winter tires, for which users need to pay additional fees.

In terms of pricing, NIO’s subscription model is not cheap, and its prices are higher than those of similar models from Mercedes-Benz and BMW, but at the same level as Porsche.

William Li believes that the existing leasing model in Europe is not particularly user-friendly, so NIO has carefully analyzed the pain points of the current leasing and subscription models and created a more flexible and reasonable approach from the user’s perspective.

NIO’s flexible and reasonable approach reflects on the user service level: the subscription model eliminates third-party services and provides car services directly from NIO, unifying insurance, winter tires, and other user pain points.# NIO implements a subscription-based all-in-one service model in Europe, which requires Chinese car owners to pay, but is a fusion of Chinese and Western innovation that is more in line with local conditions. However, whether local car owners can accept it remains to be seen.

Core strategy: prioritize infrastructure construction and hardware advanced configuration

By 2025, NIO plans to build 1,000 battery swapping stations in markets outside of China, and the majority will be in Europe.

Currently, NIO has access to 380,000 charging piles in Europe, and these piles can be used for charging with an NFC card, but NIO’s battery swapping service is its unique advantage.

According to NIO’s plan, it plans to build 20 swapping stations in Europe by the end of 2022 and 120 swapping stations by the end of 2023.

The larger plan is to build 1,000 battery swapping stations in markets outside of China by 2025, and the majority of them will be in Europe.

NIO’s strategy of prioritizing infrastructure construction, supporting services, and not rushing to sell cars is to replicate the experience in the Chinese market.

In the Chinese market, NIO’s battery swapping service system did not really pick up until 2020, three years after NIO’s first model ES8 was launched.

NIO replicates the experience in the Chinese market to the European market, and whether it can be accepted by Europe with relatively backward infrastructure needs local market validation to provide an answer.

However, when it comes to NIO’s three models, ET7, ET5, and EL7 (ES7), some performance is excessive for European consumers.

The three models built on the NT2.0 platform have a large amount of sensing and application hardware embedded in advanced driving assistance and employ the most advanced autonomous driving computing chips. They are the only models sold in Europe that have such features.

The NIO Aquila ultra-sensing system is equipped with 33 sensing hardware components, including one LiDAR sensor, multiple high-definition cameras, and four NVIDIA Orin-X autonomous driving computing chips, which provide overwhelming advantages over Mercedes-Benz, BMW, and Porsche models. Local European media even has concerns about the excessive performance of the high-end driving assistance system hardware for European consumers.

NIO has its own considerations.Li Bin says: “I think cars in the future may look a lot like our cars, including future European cars, because it makes sense.” It’s like how the camera on mobile phones now protrudes a bit, which was uncomfortable at first, but it makes sense and takes better photos. People gradually feel that if it’s not like that, it’s not advanced enough.”

Obviously, NIO is preparing for a long-term battle in Europe, relying on its advanced assisted driving system hardware to surpass its competitors and gain a crushing advantage over their products, showcasing its luxury brand identity.

NIO’s infrastructure construction leads the way, and its service model is completely transplanted with a product strategy that incorporates high-end assisted driving hardware, which will inevitably lead to a high subscription price. However, the risk also lies here, can NIO’s boldness in the European auto market win over local consumers?

NIO Model may be more likely to be accepted in Europe

NIO is not the first Chinese brand to sell automobiles in Europe, but it is the most likely to make European users perceive Chinese automakers as Chinese brands.

In the Chinese auto market, renowned for its “volume,” NIO is a topical brand that combines luxury, intelligence, electric power, energy, and lifestyle labels. Its sales and reputation have proven that it can stand up to Mercedes-Benz and BMW in China.

Returning to Europe, at a time when the local electric automobile industry is still in its infancy, NIO has brought new vitality to the European automobile market by transplanting the business models of NIO BaaS Switch, NIO House, and NIO Life, which are popular in the Chinese market.

Strategically, NIO maintains global uniformity by providing brand value to every regional market, while tactically maintaining flexibility.

In different segmented markets in Europe, NIO maintains a consistent strategy of leading infrastructure construction and embedding advanced hardware in its products, but sells cars differently according to different situations.

Whether it’s Norway’s one-time purchase sales model or the European Union’s four-country subscription-based model, NIO provides consumers with an overall service experience of intelligent electric cars, not just a single car product.

It is not easy to challenge Mercedes-Benz, BMW, Porsche, and Volvo on their home turf in Germany and Sweden with product strength alone, as local consumers are accustomed to the driving experience brought by Mercedes-Benz and BMW and have a deep understanding of their brand.

NIO’s comprehensive service experience model with products, services, BaaS, and NIO Life entering Europe, is more likely to be perceived and accepted by local consumers.

Just like Chinese smartphone companies entering the European market, Chinese brands provide not only a smartphone but also a 4G communication network to go with it.

The NIO model relies not only on product strength but also on comprehensive advantages to enter the European market, which may make it easier for consumers to accept.

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.