The semi-official announcement of the third brand makes it unstoppable for NIO to sink its products.


Recent news shows that NIO’s fourth complete vehicle plant will settle in Chuzhou, Anhui Province. This plant will mainly produce NIO’s third brand “Firefly” (internal code name). With the landing of the third brand, NIO will form a brand matrix including NIO, Alpine, and Firefly, covering different price ranges. According to relevant news, NIO’s second brand Alpine is expected to begin delivery in 2024. As for Firefly, positioned as a small car brand, it will be released in the third quarter of 2024. It is especially noteworthy that there are rumors that the Firefly brand may make its debut in Europe.

Why is NIO releasing a third brand?

How the prospects of China’s domestic automobile market, especially the new energy vehicle (NEV) market, in 2023 is viewed are still divided among various parties. Looking at macro policies, whether it is the exit of the NEV subsidy or the price war initiated by Tesla, or the fact that the penetration rate of domestic NEVs has already reached 30%, it seems to indicate that the high-speed growth of NEVs in the past few years may be difficult to sustain. With the continuous decline of lithium ore prices, one of the biggest cost components of electric vehicles – batteries – is expected to rapidly decline, opening up cost space for electric vehicle companies to lower their prices. By stimulating consumption through terminal price reductions, it is possible to attract more petrol car owners to switch to electric or hybrid cars. However, overall, all parties generally expect the growth rate of China’s domestic NEV market to slip from almost 100% to 30% this year.

From the perspective of individual enterprises, NIO faces great competition and challenges. As NIO’s lowest-priced model, the ET5, did not attract too many Tesla and BMW customers despite its advantages in price and configuration. In terms of NIO’s high-end vehicle types, on the one hand, many domestic traditional auto companies and new forces are seeking to move their brands upwards, and it is self-evident that Geely’s JiKE and BYD’s Envy are challenging NIO’s high-end positioning. On the other hand, traditional luxury brands such as ABB are also continuously iterating their electric vehicle models, making the competition faced by NIO more intense.“`markdown

In this case, leveraging the established brand appeal is a shortcut for NIO to improve sales by promoting the product sinking. However, NIO is relatively extreme. Before the Alpina model was unveiled, NIO started to create a third brand, such as Firefly, that is positioned lower. This reflects how strong NIO’s crisis awareness is now.

The difficulty in creating a low-cost model is not small

But creating a low-cost model is not an easy task for any car company. Both Alpina and Firefly will be significantly lower than NIO’s current brand models. Technically, it has never been difficult to derive lower-level models. But NIO still has many problems to solve:

First of all, on the vehicle platform, will NIO use an old platform for transformation or design a new low-cost platform for Firefly? Although using an old platform can save a lot of development costs, NIO needs to evaluate whether it can meet the needs of targeted customers in the market from a technical perspective, and whether the material costs of the old platform are too high, which is a factor that needs to be balanced. If there is no way to reduce the material costs of the old platform and can only design Firefly through downgraded configuration, NIO may not benefit from it.

For forward-looking technologies such as battery swapping and driving assistance, whether Firefly still needs them still needs to be questioned. Take autonomous driving as an example, whether NIO opens up the ability for Firefly charging station owners to order NOP or future NAD is a difficult problem. If it is opened, high-end car owners will definitely be dissatisfied. But if not, NIO’s autonomous driving solely relies on the subscription volume of NIO brand car owners, which is difficult to dilute the initial investment and become a new source of revenue for NIO. As for battery swapping technology, whether it will be deployed on the Alpina and Firefly brands is also a tricky problem. Scalability can help NIO quickly reduce costs and earn considerable profits, but it will also harm the rights and interests of previous car owners.

Diluting Brand Value with Low-End Brands

Creating a new sub-brand would require significantly less investment than building a new car model. Regardless of whether it is to increase brand awareness or to build sales and after-sales networks, NIO needs to invest a large amount of resources. However, NIO still insists on creating a brand new brand and is unwilling to dilute the NIO and Alpine brands.

However, NIO is currently facing a significant challenge. Will customers who originally intended to purchase a NIO vehicle opt for a more cost-effective alternative, the Firefly brand, due to significant price differences between the two brands? This will not only fail to increase NIO’s overall sales volume, but it will also negatively affect their sales revenue and per-vehicle gross margin. Additionally, if Firefly’s low-end model produces poor specs in order to create a gap between it and the NIO or Alpine brand, it may struggle to succeed in the market. Taking into account the Firefly’s positioning in the 100,000-200,000 yuan price range, there is relatively little room for NIO manufacturers to operate in this space.

Furthermore, it is also challenging to determine what kind of services Firefly and Alpine brands can provide that match NIO, and to what extent. Replicating the existing services offered by NIO for entry-level brands is not practical. Therefore, finding one’s own positioning and launching a market-oriented product that meets the expectations of the target user may require NIO to conduct a lot of market research, not only to understand the competitors’ situation, but also to learn about what the target customers really want.

While Alpine has not yet landed, NIO’s Firefly is already in a semi-official state, demonstrating NIO’s desire to boost confidence in the terminal market by proactively releasing various good news. Without strong policy stimulus, the domestic automobile market in 2023 may not be as optimistic as many had initially anticipated. Therefore, starting with Alpine, NIO’s downward trend of brand and production is already unstoppable. When the 100,000 yuan NIO accelerates, will it trigger a new round of fierce competition in the domestic electric vehicle market and remain an exciting prospect worth waiting for.# 欢迎来到我的个人博客

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