Nio and Tesla go head-to-head

Source:Global Times Published: 2017/12/25 18:18:39

China’s new ES8 EV outclasses US counterpart, but faces tough road ahead

Guests look at the new ES8 sports utility vehicle at a launch event in Beijing on December 16. Photo: VCG

After unveiling its first mass-produced model, the ES8 SUV, China's electric vehicle (EV) start-up Nio has officially tapped into the consumer market.

During the vehicle's launch event aptly named NIO Day, which was held on December 16 at the Wukesong Arena in western Beijing, Nio's founder Li Bin highlighted some major features of the brand new ES8 model.

For instance, he said its e-powertrain enables the vehicle to accelerate from 0 to 100 kilometers per hour in just 4.4 seconds. It also has an all-aluminum body, its NOMI - an in-car AI system - can interact with passengers and its emotion engine gives users a friend on the road, according to Li.

All those better-than-expected features captured the attention of audience members at the event, which was followed by broad discussion on social media. Some Internet users "liked" photos of the ES8 SUV posted by their friends on WeChat, others, however, raised questions about the sustainability of the original equipment manufacturer (OEM) production model used during the assembly of this long-awaited vehicle. 

Nio's latest model has also been compared to Tesla's in media reports. For example, CNBC noted that China's Nio takes on Tesla with a car half the price of the US electric carmaker's Model X. The Chinese model has similar levels of performance, electric range and interior roominess as the Tesla Model X, but for half the price, news site reported on Friday.

The ES8 also has a base price of 448,000 yuan ($68,114) before subsidies, according to the company.

Posing competition 

Autonomous driving has become a hot trend in recent years. With the NIO Pilot system, the new ES8 vehicle boasts a trifocal front-facing camera, four surrounding exterior cameras, five millimeter-wave radars, 12 ultrasonic sensors and a driver monitor camera. In addition, the ES8's charging system allows its battery to be replaced in just three minutes.

As a new-generation China-made EV, the ES8 also gives life to new scenarios that are completely different from the traditional car purchasing and driver experience.

"An AI-powered system and an efficient charging system are both in accordance with reality in China. In this regard, it [the ES8] is better than Tesla," said a sales manager from the traditional automobile sector, who prefers not to be identified. 

Nio says that its self-developed mobile charging service enables the ES8 to run 100 kilometers after charging for only 10 minutes, as noted on its website. And by 2020, the company plans to build over 1,100 power swap stations across the country.

In contrast, Tesla's Model S and Model X have to be charged for an hour to run about 80 kilometers, according to Tesla's Chinese version website. Also, the US automaker has to navigate some markets in order to adapt to specific requirements, car blog Electrek reported in October. 

For example, as the Chinese government developed its own charging standard, Tesla now has that standard built into its cars, Electrek noted.

Rising doubts

However, some industry representatives have raised questions about the sustainability of the OEM model applied during production of the ES8, as its major partner JAC Motors has not been performing as well as expected in the passenger car sector.

For example, JAC, a State-owned carmaker based in Hefei, capital of East China's Anhui Province, was included onto a watch list on World Consumer Rights Day 2013 - marked every March 15 - due to noticeable rusting of its steel plates, according to media reports.

As such, it will not be easy for Nio to work with a State-owned enterprise like JAC, and some industry observers have also warned that if there are any quality issues, the two companies will inevitably blame each other without finding joint solutions.

Still, Li, the founder of Nio, believes that JAC has been moving forward and making progress, he told a press conference held after the launch event.

"People should not have cliché views on [JAC's] corporate development," he said.

This is not the first time that electric carmakers have trialed a battery swap program, but Nio's program has been regarded as an innovative move.

In June 2013, Elon Musk, co-founder of Tesla, unveiled a new device that could replace the battery of a Tesla Model S in just 90 seconds, faster than Nio's three-minute program.

But Tesla's battery swap program was not popular, with Musk admitting that it was not favored as consumers seemingly lacked interest, Fortune magazine reported in June 2015.

"Nio has to fully take on the high costs of building a charging station," said an industry insider who spoke under anonymity. Furthermore, the high commercial land prices in China's first-tier cities are also weighing on its operation, the insider noted.

Future ambition

China is now taking the lead in the EV market, as there is a real government push to clear polluted skies, Bill Ford, executive chairman at Ford Motor Co, said during the 2017 Fortune Global Forum held in Guangzhou, capital city of South China's Guangdong Province, earlier in December.

China sold 507,000 new-energy vehicles (NEVs) in 2016, an increase of 53 percent year-on-year, the Xinhua News Agency reported on December 10, citing official data. And sales of pure EVs surged 65.1 percent year-on-year to 409,000, accounting for 80 percent of domestic NEV sales.

As the EV market will continue to grow in 2018, Nio has a big plan to invest in battery swapping, charging stations and after-sales service centers.

The company has raised more than $1 billion in its latest fundraising round, led by existing investor Tencent Holdings Ltd, bringing the start-up's current value to about $5 billion, Reuters reported in November.

New investors in the round included US hedge fund Lone Pine Capital, Chinese investment firm CITIC Capital and Scottish fund manager Baillie Gifford, according to Reuters.

By calculating rental fees that Nio has paid every year for its service center, in addition to costs of charging stations, its profit margins appear to be relatively low. It is also unlikely to exceed 10 percent of the profit margin in assembly processes that follow traditional car manufacturers, another anonymous industry insider noted.

"It's too early for Nio to make money, to some extent. It has to have a stronger fundraising capability than Tesla," the insider said.

This story is based on an article by the Economic Observer.


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