Can EV upstart Nio ever upend premium rivals in the UK?
Nio ET7 starts at €1191 (£1040) per month for a three-year lease in Germany
Nio faces a challenge of gargantuan scale: win over UK premium customers
In 2016, a little-known Chinese company called NextEV relaunched itself at a global party held at the swanky Saatchi gallery in London’s Chelsea. The electric car company would now be called Nio, baby-faced founder William Li told the assembled crowd, competing for attention with its launch model – the 1341bhp EP9 electric hypercar – lurking menacingly on a nearby podium.
Fast forward to 2022 and Nio is now regularly billed as China’s answer to Tesla for its focus on the digital experience, innovative charging (this time battery swaps) and the often mind-bending performance from its otherwise practical range of SUVs and saloons.
Nio is now fairly well established in China, with total sales of just under 250,000 vehicles as of 30 September, and last year it ventured outside to test the waters of the competitive European premium market, first in EV-friendly Norway.
Earlier this October, it expanded its footprint with a launch in the lion’s den of premium markets, Germany, as well Sweden, the Netherlands and Denmark, with a range that very closely matches the Tesla Model 3, Model Y and Model S.
Founder Li also broke the significant news that the brand will finally start selling cars in the UK from late next year, seven years after the King's Road event.
So what are Nio’s chances of making it big in the UK? Aside from Land Rover and Volvo, the UK is wedded to its German premium cars as strongly as Germany itself, and Tesla is the only upmarket brand to have made any significant dent into their market share in recent years.
Li is banking on a customer shift favouring brands like Tesla with more of a smartphone mindset. “The way that people perceive and define premium has changed,” he said. “The current generation actually perceive premium-ness from smart technologies.” The fact that all models come with lidar sensors as standard, for example, potentially unlocking elements of hands-free driving, could be more of a draw than racing heritage or badge recognition.
Put aside any notion that Nio will win premium custom on cost, though. Six years ago, the pitch was “the quality of a BMW at the price of a Toyota" but Nio is now firmly in the premium bracket as far as pricing is concerned. Li boasted at the Germany launch that the average selling price of its cars in China matched those of BMW’s EVs and beat those of Audi’s.
Not that we’re likely to see list prices in the UK. After a year’s experimentation in Norway selling cars and leasing batteries, Nio has switched to an all-subscription/lease model for the rest of Europe. It didn’t give any details of the UK launch but expect much of the same here: “Flexibility is the new premium,” Li said.
Based on German subscription prices, this will not be cheap. The ET5 saloon – a BMW 3 Series/Model 3 rival that Li specifically mentioned as coming to the UK – starts at €999 (£870) per month for a three-year private lease with the 75kWh battery. Insurance and servicing is included in that.
The larger ET7 saloon starts at €1191 (£1040) monthly for the three-year deal in Germany, but if you want the flexibility to hand the car back when you want, you pay €1540 (£1340) monthly.
Subscription is a small but growing option to get into a car in the UK, with Volvo offering the nearest comparison. For example, an XC90 SUV costs from £909 a month for a fixed 36 months, or £1039 a month for the option to bail with three months' notice.
In contrast, you pay £1137 for a three-year deal for Nio’s comparable SUV, the EL7 – renamed from ES7 after Audi complained Nio’s ES naming for its SUV sounded close to its S-badged performance range – rising to the equivalent of £1460 for the fully flexible package. That’s a hefty premium, reflecting partly the extra cost to go electric and partly the single-spec, fully loaded route Nio has taken to simplify manufacturing.
Nio’s trump card is battery swapping. Because all its battery packs are the same dimensions, no matter the size or the model, they can be swapped not just for a freshly charged pack, but also for a more energy-dense, long-range alternative for long trips. Moving from one to another entails a simple change to your monthly subscription fee, Nio promises.
The company currently offers 75kWh and 100kWh capacities, but it is also working on a 155kWh battery for an early 2023 roll-out in China, giving a claimed 600-plus miles of range for the ET5. A cheaper 60kWh unit is also in the works.
However, the clamour in China is for lower-capacity packs to bring the cost down, rather than the gargantuan 155kWh ultra-long-range version, according to Fei Shen, head of Nio Power. “Personally, I don’t think this battery will be widely used,” Shen said. “In reality in China they more ask when will we deliver a small-capacity battery”. Essentially, Nio claims to have cured range anxiety by ensuring customers use only the battery they need for their weekly mileage. “By offering this flexibility and upgradeability to our users, we can reduce demand for materials by 17%,” Li said.
Nio will bring battery swapping to the UK and potential early adopters will be looking very closely at where these will be located. In China, it has 1183 swap stations – with 80 in Shanghai alone – creating desirable catchment areas for its apartment-dwelling customers, who might be in easy driving distance of two or more. Installing 'power swap stations' is much more expensive than piggybacking the public charging network – the cost is €400,000 (£350,000) per station, according to Li's figures – but it's not really in the wider scheme of things, he argued. “So for 1000, the total investment is €400 million. It’s a big number but in comparison to whole automotive industry and energy sectors, it’s a mere fraction,” he said.
That’s not the only cost. Other Chinese companies have entered mainland Europe and the UK in more traditional and cost-efficient ways by signing up dealers. Great Wall Motor has inked an agreement with the Lookers dealer group to sell its cars, while BYD has got into bed with the Pendragon group for its planned UK rollout.
Nio, on the other hand, has gone the Tesla route of selling directly to customers, with all the benefits but also additional costs that brings. Its modus operandi is to open a series of flagship Nio Houses: plus-sized showrooms in prime shopping locations (such as in Oslo, Norway, pictured above) that operate as brand builders and are staffed with non-pushy ‘fellows’ to gently guide you into making the right decision. Nio is negotiating on a London property right now, Li said.
How Nio will service cars remains to be seen. In China, it operates mobile service vans.
Moving to a subscription model further increases Nio’s capital costs by keeping cars permanently on its books, at least until they dispose of second-hand models further down the line. “If you sell a car, you get cash back immediately. If you offer subscription, you get cash back over the following years,” Nio president and co-founder Lihong Qin said at the Germany launch in Berlin. “There must be some fundraising, which is a new requirement for us but that’s our challenge.” Nio has yet to make a profit, and unlike many Chinese car companies – including MG parent SAIC – is not backed by the Chinese state.
Nio has already proved in China that it can take on and in some sectors beat the premium incumbents. In Europe, it’s going to be much harder, despite weakening loyalty bonds to traditional brands in the shift to electrification. It could be a good while yet before the Chelsea tractor of choice is a Nio.