Tesla vs NIO: a battle for China’s electric soul?

Obviously, the world’s largest auto market is a critical part of Tesla’s global sales strategy, and the recent launch of Model Y on the Chinese market is a major milestone. However, the California carmaker may find the competitive landscape in the Middle Kingdom more challenging than in other markets.

Above: A look at the Tesla Model 3 and NIO ES8 (Source: Wall Street Journal / YouTube)

Chinese car buyers love SUVs, especially models from global prestige brands such as Mercedes, BMW and Audi—these vehicles have all done very well in the Chinese market, and their makers are casting a wary eye on Tesla now that it has an electric crossover on offer at a tempting price (the Long Range Dual Motor version of Model Y now starts at 339,900 yuan, the equivalent of about $52,000).

Tesla and its fossilized rivals both face a daunting challenge in the form of what Chinese media are calling a “new force”—domestic EV startups including NIO, XPeng and Li Auto, all of which have small electric SUVs for sale.

“Competition in the premium electric vehicle segment is set to escalate now that Model Y is showing signs of grabbing a big market share,” manufacturing analyst Gao Shen told the South China Morning Post. “Tesla’s rivals have to take action to fight back to maintain their share.”

NIO (NYSE:NIO) is definitely an EV startup worth watching. Founded in 2014, the Shanghai-based automaker has seen its stock price surge over 1,500% since its 2018 debut on the US market (and we thought TSLA’s 700% rise was impressive).

NIO has embraced battery-swapping, a technology that Tesla tested, then abandoned, in 2013/2014. The company offers the option of buying a car without a battery, then paying a monthly fee for a sort of battery subscription service. According to a recent video from the Wall Street Journal, NIO has over 160 battery-swap stations in service across China (as of last August, Tesla had over 2,500 Superchargers and 2,400 destination chargers in the country).

Above: The showdown between Tesla and NIO (YouTube: Wall Street Journal)

The company recently hosted a consumer event called NIO Day 2021, at which it launched a new luxury sedan and announced various battery and software improvements. Chinese stock analysts were impressed, and some raised their price targets for NIO stock.

In the first half of 2020, Tesla enjoyed a comfortable sales lead over the “new force” automakers. According to Statista, the top-selling electric brand in China was the giant BYD, which sold 60,253 EVs. Tesla came in second, with 49,714 units, and NIO took the #9 spot with 14,169 sales.

Since then, however, NIO has powered ahead. In the fourth quarter of 2020, NIO delivered over 17,000 units, a year-on-year increase of some 111 percent. The recent start of Model Y deliveries in China raised the stakes once again—it will be interesting to see what the sales figures look like at the end of the current quarter.

NIO co-founder and President Qin Lihong denied any fear of Model Y—as China’s Global Times reports, he said his company’s orders are steady and increasing, even following the launch of the newest Tesla.

Some predict that the real battle will not be Tesla vs the “new force,” but rather all EV makers vs legacy auto.

Cui Dongshu, Secretary General of the China Passenger Car Association, said Tesla and its challengers all have their unique features, and their own loyal buyers. “The changes will take place in the traditional auto market where the internal combustion engine is dominant. Luxury SUV manufacturers will face mounting pressure in this regard.”

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Written by: Charles Morris