NIO Sets Sails Again on Its 7th Year Anniversary!
As Tesla continues to reduce prices and BMW and Mercedes-Benz’s electric car pricing collapses, NIO is facing a lot of difficulties. In response, NIO’s sub-brand is planning to come out.
Recently, there have been more and more discussions about NIO’s low-end sub-brand. For example, WeWork’s former CEO, Iron, has joined NIO and will be in charge of the new brand. There are also rumors that NIO will make A00-class small cars (Hongguang MINI) with a price of 30,000.
The advancement of technology, the reduction of costs, and the narrowing of brand boundaries are all telling us that the current luxury electric vehicle market is in chaos. NIO has taken advantage of opportunities, but is now facing challenges.
In the face of volume bottlenecks, there is an urgent need to open up new horizons
Recently, several major new forces in car manufacturing have released their sales figures for July. NIO, Ideal, and XPeng are still in the front row, but the rankings have changed.
Data shows that Ideal Cars has reversed to become the best-selling, XPeng is in second place, and NIO is following closely behind. We have noticed that this is the first time since the delivery of NIO in 2018 that it has lost the first place in the monthly delivery of new forces in car manufacturing.
Although NIO has lost its “first” place, it still ranks first in cumulative sales from January to July 2021.
In the face of declining delivery volume, NIO has also made an explanation: “The main reason is due to supply chain shortages. Our full supply chain capacity is at 7500+ and we are doing our best to push it to 8000. However, we will still proceed according to our own plans and pace.”
At the same time, in addition to the original car manufacturers such as XPeng, Ideal, and Tesla, internet technology companies have also started manufacturing their own cars, and their new car pricing has undoubtedly created huge pressure for NIO.
Recently, Baidu and Geely’s new intelligent car company, Jidu Auto, has been making a lot of noise and expects a new car price of more than 200,000 yuan. Lei Jun, Chairman and CEO of Xiaomi Group, has also stated that the price range for the first Xiaomi car is between 100,000 and 300,000 yuan.
Li Bin, founder, chairman and CEO of NIO, often says, “Make friends with time and move forward in the mud.” However, time is also the “enemy” of all intelligent electric vehicle companies.
For NIO, how to expand its market share and face various pressures is a new challenge. Obviously, NIO urgently needs to find a breakthrough.
Anchoring the low-end market, Iron joins NIO
Before releasing the July sales figures, NIO was planning to launch a new brand, positioned lower than NIO, with a price range of 150,000 to 250,000 yuan.Some opinions suggest that the arrival of low-end NIO will have the biggest impact on XPeng, whose positioning is to popularize smart electric cars with a price range of 150,000-270,000 yuan. However, if NIO’s sub-brand enters this range comprehensively, takes over NIO’s battery swapping system, and adds the service capability of this new brand, it will be a great temptation for XPeng’s audience.
For NIO at present, just like expanding its market share, how to establish the positioning of its sub-brand as soon as possible and improve the recognition of the sub-brand by more consumers in the short term is also a challenge it faces.
Recently, 36Kr reported that Ai Tiecheng, the former General Manager of WeWork China, has been appointed as the Vice President of NIO’s new strategic task. He will be responsible for an independent mid to low-end brand outside of NIO, reporting directly to Li Bin, Founder and CEO of NIO.
It is rumored that Ai Tiecheng was determined by Li Bin before the Chinese New Year. He graduated from Tianjin University, has been the Vice President of InterContinental Hotels Greater China and Vice President of Shanghai Disneyland Marketing Department, and wrote the book “Brand Empire”.
Some commentators believe that what makes Ai Tiecheng and NIO most compatible is his previous work experience, where he pays special attention to “service” rather than the product itself. In other words, he has strong sales ability for “service”. At the same time, from Ai Tiecheng’s personal work experience, he has a deep cultural identity with NIO.
Whether it is the demand for industry market by new energy car makers or the competitive environment, launching a mid to low-end brand is the only way for NIO to reach a larger market. By creating a new sub-brand and entering the mid to low-end market, it can form differentiation with the existing high-end brand, enter the mass market with entry-level models, and the price range is extremely attractive to the audience, thus improving its market share.
According to current information, in terms of service, NIO’s sub-brand will also inherit the existing battery swapping system, but it will definitely be a charged commercial model and will also have BAAS. After BAAS, the price range will be very attractive.
This brings a difficult problem: if the battery swapping and service system is maintained, the cost cannot be reduced, and the low-end brand will be meaningless. If the battery is not swapped and the service cost is not reduced, it will be no different from ordinary new energy brands currently available.
Balancing the differentiation of switching and service and the relationship between price is also a huge challenge for NIO.
The sub-brand plan is about to be launched. In March last year, NIO’s stock price was only a few yuan, and it faced many difficulties and almost went bankrupt several times, but it persevered. Now, the average selling price of NIO’s cars has exceeded 400,000 yuan, ranking first among domestic cars, and high-endization is the root of NIO’s success.The result shows that NIO’s business has been successful and most people now recognize NIO’s high-end brand positioning. The launch of a sub-brand by NIO this time is aimed at reaching even further goals. According to media reports, if progress goes smoothly, the sub-brand model can be released in the first half of next year. NIO responded to this by saying “No comment.”
At present, NIO has advantages that other brands cannot match, which is the result of year-long efforts to establish a good reputation. By looking at NIO’s product matrix, one can find that none of its models are priced below RMB 350,000 ($54,000). However, consumers are willing to pay for them. This is also why NIO has always been one of the top players in the new energy vehicle market. Among many new energy vehicle makers, NIO has the highest owner loyalty.
Some car owners have said, “If there is a small car, I might consider buying it, because my wife thinks our ES6 at home is too big. She would definitely like a small car from NIO.”
Meanwhile, NIO must maintain its competitiveness in the electric vehicle market, especially against its competitors XPENG and Tesla. Otherwise, in the long run, once the purchasing power of high-end market consumers reaches its peak, NIO will face another crisis.
At this critical moment, NIO has chosen to cultivate the middle and low-end markets to avoid facing another crisis in the future.
In the 2020 earnings call, Founder and CEO William Li said, “Entering the mass market is not ruled out as a possibility.”
At the NIO used car business conference in January this year, Li also said, “We will not enter the mass market in the near future. However, in terms of possibilities, we will definitely find a more positive way to enter the mass market in the long term.” Nevertheless, from a long-term development perspective, it is clear that NIO cannot afford to ignore the mainstream mass market, if it wants to become even stronger and bigger.
On the occasion of its seventh year in business, NIO is now on a new journey.
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.