A few days ago, Tesla announced the prices of its Model 3 Long Range version, which includes a rear-wheel drive Long Range version for CNY 339,050 after subsidies, and a Model 3 Performance high-performance version for CNY 419,800 before subsidies. For a detailed analysis, please refer to our previous article “Tesla Strikes with a Royal Straight Flush: Why Buy the BBA When You Can Get a 668-kilometer Range for CNY 339,000?”.
The news was widely celebrated across the Internet, but for some bystanders, it was a nightmare for NIO, and the discussions among netizens about NIO’s downfall have been heated.
Model 3 Long Range can achieve a range of 668 kilometers, which is not much worse than that of equivalent gasoline vehicles of BBA. If paired with Tesla’s Supercharger, this performance can effectively eliminate the range anxiety of most people. Therefore, for NIO, it is indeed a big challenge, especially because the highest range of NIO ES6 is currently only 510 km.
Is NIO going to be affected by Tesla’s Long Range? Let’s first look at the product aspect.
ES6 is positioned as a luxurious SUV for urban families, whereas Model 3 is defined as a luxurious electric performance sedan. There is a fundamental difference between the two models in terms of vehicle type.
Due to different vehicle usage environments between China and other parts of the world, such as residential parking space and average income, the average Chinese household owns only one car on average, requiring the vehicle to serve multiple purposes, such as commuting to and from work, family outings for three generations, and travel for the elderly on weekends. As a result, space and vehicle form are very important. The demand for luxury is also essential since both practicality and face must be taken into account.
In terms of space size, ES6 is positioned as a mid-size SUV with body size of 485019651758 mm and wheelbase of 2900mm. It is a typical luxury car size that Chinese people like.
The size of the NIO SUV is close to that of the Audi Q5L, which is more than enough for family use and provides a comfortable riding experience for both the elderly and children.
As for Model 3, it is positioned as a B-class sedan with body size of 469418501443 mm and a wheelbase of 2875 mm. Compared with the BBA of the same level, there is not much difference. However, it is unfair to compare it with ES6.
SUV models have a slight advantage in storage and loading capacity, not to mention that ES6 is still a mid-size car. It is not reasonable to compare the size of C-class SUV and B-class sedan in terms of space size.
In terms of interior materials, NIO did not disappoint. It is made according to the standards of “luxury brands”. The appearance and touch are qualified, and almost everything that can show luxury is used, such as leather, soft bags, and ultra-fiber velvet.
The “minimalist” design of Model 3 interior has indeed won Tesla a lot of fans, especially the large screen. However, it also brings learning costs for users, and there are difficulties for some car owners in China to accept this design. In addition, Tesla’s interior materials are not so radical, and it is often joked about.
Compared with Tesla, XPeng, and WM Motors, which achieved delivery earlier, NIO fills the gap in luxury electric vehicles.
As for workmanship, there were some problems with the ES8 in the early stage, such as gaps and assembly problems between the sheet metal. However, after iterations and upgrades, especially in the performance of ES6, the entire workmanship and materials are excellent.
Of course, Tesla is no exception. Previously, the imported version had problems such as front fender displacement, large body gaps, and uneven roof. Although the domestic version has slightly improved in manufacturing details, the precision of craftsmanship has not yet reached the level that should be at this price.In terms of configuration, compared with the Model 3 Long Range version, the NIO ES6 sport version with ES6 comes with standard features such as NOMI artificial intelligence voice interaction system, induction electric tailgate, front acoustic laminated glass, rear privacy glass, leather seats, wireless phone charging, 10-color ambient lighting, PM2.5 filter car air purifier, and panoramic sunroof that can be opened.
The Model 3 Long Range version adds an advanced interior package and features like heated rear seats, 15-speaker premium audio, monochrome ambient lighting, and front fog lights, but Tesla still lags behind in terms of comfort configuration.
In terms of driving experience, both Tesla and NIO can reach the mainstream level, and from the perspective of power performance only, the ES6 sport version with front and rear permanent magnet synchronous motors is equivalent to the rear-wheel drive version of the Model 3. However, there is still a gap compared to the Model 3 performance version.
Moreover, there are obvious differences between these two cars after driving them. The Model 3 is more playful because it is rear-wheel drive, and it can easily “drift” even off the track. The suspension is tuned to be stiff, and it can be felt clearly during high-speed lane changes and cornering. It is a very fun electric car to drive.
The ES6 is different because it is an electric car and acceleration is easy, but because of its large body, it is not as agile as the Model 3, and more importantly, the ES6’s suspension is noticeably more comfortable. It is not soft, but rather “resilient”. The body posture is maintained during cornering and sudden direction changes, and the overall tuning of the ES6 leans towards family use, suitable for weekend trips with family.
Autonomous driving and range are still the Model 3’s strong suits. The basic version of the AutoPilot that comes standard with the Tesla Model 3 can achieve Level 2 assisted driving, and FSD is expected to achieve fully autonomous driving in the future, compared to Level 2 for NIO.
In terms of range, the Model 3 Long Range version can achieve up to 668 km. Tesla’s excellent three-electric system makes the Model 3’s range performance outstanding, and it is higher than the 70 kWh and 84 kWh range of the ES6 currently available. Coupled with Tesla’s own supercharging technology, this range is indeed very competitive.
However, NIO has announced that it will launch a 100 kWh battery pack in the fourth quarter of this year, with a range of over 610 km, meeting the needs of most intercity journeys for new energy vehicle owners.
Additionally, NIO has an important “battery swapping” service system. This is NIO’s trump card in terms of product and service cooperation, and a full life cycle service will be provided for the vehicles. The swapping service will be explained in more detail later.
As we mentioned earlier, Chinese consumers have a practical need for spacious and luxurious cars, rather than simply following trends. For the same price, Chinese consumers prefer all-around options, and the ES6 SUV exhibits typical “Chinese luxury” in terms of space, materials, and features. This is not to say that the Tesla Model 3 is inferior to the ES6; Tesla places more emphasis on driving performance and attracts a younger, performance-oriented user base.
NIO clearly focuses on families with children and emphasizes a luxurious, technological feel, and elevated features according to Chinese consumer preferences.
After comparison, both have their own advantages and disadvantages, but the Model 3 and ES6 are products aimed at different levels of demand, a midsize SUV versus a B-class sedan.
Both sedans and SUVs aim to diversify the electric vehicle market and offer consumers a variety of choices. The decision between ES6 and Model 3 depends on the consumer’s own needs.
Next, let’s look at the market level.
As we mentioned before, the ES6 and Model 3 are not products that compete on the same level. The arrival of long-range vehicles can promote market growth. Electric vehicles are still a young, rapidly growing market. In 2019, global sales of new energy vehicles reached 2.2 million, a 10% increase over the previous year, but only accounted for 2.5% market share of the global passenger car market, according to data from the China Association of Automobile Manufacturers.
In other words, the new energy vehicle market is very young and growing rapidly. Although NIO’s overall sales may not be as high as Tesla’s, it is because the entire market is still relatively small. In other words, there are not many people who want to buy new energy vehicles yet; as the market expands, even if Tesla remains the market leader, NIO and other manufacturers still have their own markets to address.
Therefore, in the long run, Tesla’s influence on the market is more favorable. The CEO of Li Auto even stated that in his opinion, Tesla is more like a “catfish” in the domestic market; it encourages local manufacturers to produce better products and serve C-end users.
At the same time, Tesla can stimulate the market by encouraging consumers to buy electric vehicles. When someone is considering buying a Tesla, they might discover other options in their search, such as the NIO, which they may find more luxurious and ultimately choose over Tesla, thereby driving market growth.
## The Relationship between Electric Cars and Fuel Cars
During an online communication session held earlier by NIO media, Dr. Shen Fei, vice president of NIO’s power management, mentioned that the competition between new energy vehicles, specifically pure electric vehicles, requires a horizontal dimension. While many consider it to be the competition between new energy manufacturers, the real strategic goal is to compete with traditional fuel vehicles.
The CEO of IDEAL Automobile also expressed a similar view. In the past, traditional vehicles have been relatively backward in development. Now, everyone is talking about intelligence, with smartphones already in the 5G era, computers and televisions have been developed very well, but the most expensive cars sold are still falling behind. Nevertheless, the development of electric driving power could make up for this discrepancy.
Furthermore, electric cars provide consumers with more vehicle options. In the past, luxury SUVs were mainly in the hands of BBA, with Audi’s Q5L, BMW’s X3, and Mercedes-Benz’s GLC accounting for most of the market share. When compared with cars in the same class, however, the ES6 offers a different experience.
First, let’s look at performance. The 2020 Q5L 40 TFSI Fashion Edition, 2020 X3 xDrive28i Luxury Edition, and 2020 GLC 260 L Luxury Edition, the main models of each series, are equipped with a 2.0T engine with a maximum power of 140 kW, 165 kW, and 145 kW respectively.
The maximum torque of the three fuel vehicles is around 300 N·m, with acceleration of 8.6 seconds, 7.6 seconds, and 8.4 seconds per 100 kilometers for Q5L, X3, and GLC, respectively. Anyone who has driven these three cars knows that although the power system is just adequate, it does not offer strong explosive power.
On the other hand, the ES6 has a wheelbase of 2900 mm, and the performance version reaches an acceleration time of 4.7 seconds, which is 2.9 seconds faster than the fastest BMW X3. While 2.9 seconds may not seem like a dramatic advantage, it provides a fast and smooth experience for drivers traveling in congested city traffic.
Moreover, the smoothness and response time of the “throttle” in electric cars are definitely superior to that of traditional fuel vehicles.
Without the jerking caused by gear changes, electric vehicles have a smooth acceleration process. The ES6, equipped with a combination of permanent magnet synchronous and asynchronous AC motors, can achieve four-wheel drive, enhancing vehicle stability during winter driving.Because there is no engine, the NVH control of the ES6 is much better than the above three fuel vehicles, and at this point listening to music and talking in the car will become a complete enjoyment.
The entry-level ES6 has reached a torque of 610 N·m, which is basically the engine torque of a 3.0T fuel vehicle, but the price of buying a 3.0T at that time will also be very beautiful.
Turning to intelligence, this should be what the new carmaker is most willing to compare with traditional enterprises, because it really is a “crushing” situation. NIO can achieve full-car OTA, while the above three models cannot. OTA can upgrade software without changing hardware, thus achieving overall vehicle performance upgrades. Theoretically, a vehicle that has been OTA is almost no different from a new car.
In addition, the NIO ES6 can achieve L2+ level of auxiliary driving, which can greatly reduce the fatigue of driving for long periods of time at high speeds. The ES6 also comes with an intelligent entertainment system, and the large screen in the car can bring rich entertainment experiences and also achieve remote control of the vehicle.
Finally, looking at the cost of owning and using the vehicle, many people think that NIO is expensive, but in fact, compared with fuel vehicles of the same level, NIO has a price advantage. Moreover, the operating and ownership costs of the ES6 are much lower than those of the above three vehicles, as can be seen from our comparison.
This is just the basic cost of owning and using the vehicle. As an electric vehicle with a “road right advantage,” the license is freely obtainable in first-tier cities. Taking Shanghai as an example, the license plate for a fuel vehicle must satisfy social security for three consecutive years, and the average price is about 100,000 yuan, with an additional agent fee of 10,000 yuan.
Of course, for those who are not in limited-license cities, this is not a concern, but for those who are, the ES6 can save nearly 100,000 yuan.
Of course, the opposition will also say that as an electric vehicle, how does the ES6 solve the problem of battery attenuation and resale value, which is probably slightly inferior to fuel vehicles. Battery attenuation is a common problem in the industry, but in terms of resale value, it is because the overall energy density of early batteries was low, and second-hand cars had no practical value.
However, NIO has solutions for these two issues, namely the battery exchange mode. At first, the battery exchange mode was criticized because the operating costs were too high, and it was indeed not worth spending money on for NIO. But according to Dr. Shen Fei, many manufacturers will join in the battery exchange in 2020.
Next, let’s talk about NIO’s services and battery exchange model.## “Service” will be NIO’s trump card
So why can NIO, a company that has only been established for about 6 years, leave a mark among the top ten luxury brands in sales in the second half of 2019?
And that’s where we need to talk about NIO’s service system, the most important of which is NIO Power, the mobile intelligent energy replenishment service system that NIO is proud of.
Let’s ask a question, is what consumers anxious about the cruising range? It seems so, but at a deeper level, consumers are anxious about energy replenishment. Even though the energy in a fuel car can also be exhausted, people will not worry about the cruising range of a fuel car, because refueling is easy enough. The importance of the battery swapping model is to change the anxiety caused by the lack of charging.
NIO’s “Battery Swap” Service actually replaces the battery directly to solve the problem of vehicle cruising range. In other words, when the battery level of a vehicle ES6 you purchased is about to run out, you can go to the official NIO’s battery swapping station to replace the vehicle’s battery, which will be a fully charged battery.
Battery swapping is currently the most efficient way of energy replenishment, and its efficiency can also be improved with the upgrade of charging stations. Even with the increase of cruising range and battery capacity, the way of battery swapping will not increase the time for energy replenishment.
This is the advantage of the battery swapping mode in terms of energy replenishment efficiency, and this mode also has a core function, which is to solve the problem of battery attenuation and second-hand residual value.
In fact, battery attenuation and second-hand residual value are related because the consumption of batteries is irreversible, and the consumption of batteries will become more obvious with later use. Besides, batteries are the highest cost of a vehicle, so the secondhand car market cannot easily judge the quality of batteries, which also leads to the low residual value of secondhand electric cars.
When NIO separates its vehicle battery from the vehicle itself, in the future, buying a NIO vehicle only means buying the “whole vehicle framework,” and the battery will be provided by NIO’s battery swapping station in the form of leasing, so as a consumer, you do not need to worry about the attenuation of the battery because the battery is not owned by you. When dealing with secondhand cars, the transaction will be made without batteries, so the condition of the vehicle framework will become a value factor.
In this service system, there is not only “Battery Swap” but also lifelong free battery swapping, lifelong free quality assurance, one-click charging, etc., and NIO also said that it will consider gradually opening it up to the market in the future.
According to NIO’s official public data, as of March 2020, NIO had landed 123 battery swapping stations, covering 51 cities, with more than 17,000 battery swapping vehicles.Since the launch of the free battery swap service, the number of swap transactions exceeded 370,000, and the penetration rate reached 48.1%, meaning that nearly half of NIO users have used the battery swap mode. This is extremely important for changing users’ perception.
Moreover, if battery swap becomes as convenient as refueling in the future, it will be possible to solve the problem of range anxiety.
Repurchase rate driven by user reputation
NIO’s service system is an integrated whole, and it is thanks to such a good service that NIO can build its future. NIO’s attention to users is exemplary in modern enterprises. Some people may think that user operation is a little ethereal and even makes clothes for the enemy, but not really.
If you have been in the NIO car owner community for a long time, you will know that NIO car owners’ love for NIO comes from the heart.
Because of their highly similar values, you will find that they are like the same person. NIO’s user operation is scary, and it has formed its fan culture.
There have been events such as NIO car owners paying for NIO advertisements out of their own pockets, Macau car owners taking NIO cars to participate in the Macau International Auto Show at their own expense, Hunan car owners inviting more than 390 people to test drive NIO in 400 days and successfully converting 45 of them into car owners, and many other events.
Opponents may say that these people are “stupid”. Note that these people are all car owners who can spend 300,000 to 400,000 yuan on a car. These people are not only not stupid but also the elites of society. Therefore, they do these things precisely because of their recognition of NIO.
Note that this is actually very important. Just like the repurchase rate of Apple phones, if NIO’s users can achieve the highest repurchase rate, NIO will become a very “scary” company. This will be a blow to compete with rivals.
Li Bin also said that looking back at the past year, NIO’s investment in products and services has paid off. One data is that “NIO sold 69 cars to old customers for every 100 cars sold.”
Therefore, good service will bring good reputation, and good reputation will make NIO. You should know that although NIO seems niche compared to Tesla, the trajectory of commercial development will tell you that niche is actually mass.
Final words
The Model 3 Long Range is good, and so is the ES6. Because they are products of two different demand dimensions, you can’t force them together. But the essence of business is to control demand, not a single product, and as a local enterprise, NIO understands Chinese consumers itself, which is its advantage.Tesla has an impact on NIO and new car makers, but not to such a great degree, as “human nature” is changeable and people’s needs cannot be satisfied by one product or brand — just as some people love shredded potato with vinegar and some people love scrambled eggs with green peppers.
Tesla’s deep impact will be on the market level, and it will be a positive one. According to INSIDE EVs, in 2019, global sales of new energy passenger cars were 2.2 million, accounting for 2.5\% of global passenger car sales, indicating that the niche market is too small. Therefore, Tesla can actually stimulate market growth.
In comparison to other luxury SUVs of the same class, the apparent advantage of NIO ES6 lies in its performance, smooth throttle and acceleration, as well as the tuning of the entire chassis, and the lower overall cost of car use during its lifecycle. However, the disadvantage is also apparent, and that is the shorter range.
If you use NIO’s battery swapping service, you will find that it is a trump card for NIO, and NIO’s users will also become the cornerstone of NIO’s success. Services and products need to be parallel, and this will also create significant pressure on NIO in the short term. Nevertheless, NIO’s long-term strategy is relatively clear.
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.