3 reasons why Tesla is overtaking NIO in China

 

As American EV giant Tesla lands funding and builds factories in China, it has deepened its competition with Chinese EV maker NIO.

1. Factories: Tesla is building more manufacturing facilities in China, whereas NIO recently canceled plans to construct new factories.

On January 7, Tesla broke ground in Shanghai on its first overseas gigafactory, signaling the beginning of a new era for the world’s largest auto market. Construction of the 84-hectare factory is set to be completed by the end of the summer, and the facility mainly produce Model 3 and Model Y cars. According to Tesla’s 2018 Q4 financial report, the company plans to produce 3,000 vehicles a week at the plant while increasing the capacity of its California factory to 7,000 cars a week.

While Tesla builds its production complex, NIO announced on March 6 that it would no longer build its own factory in Shanghai. “[Not building the facility]  allows NIO to focus on the joint manufacturing model in the long term,” NIO said, adding “The company believes that the existing NIO/JAC plant in Hefei will give it capacity and flexibility to support its market penetration and growth plans for the next two to three years.” 

 

2. Funding: Tesla is loaded with cash from Chinese banks; NIO continues to lose money.

Stock price of TESLA INC (TSLA) and NIO INC (NIO) on NYSE.com

Tesla has secured USD 521 million in loans from several Chinese banks, including China Construction Bank, the Agricultural Bank of China, Industrial & Commercial Bank of China, and Shanghai Pudong Development Bank, to build its domestic vehicle and battery factory. The company also amended a separate asset-backed credit agreement, increasing the amount it can borrow by as much as USD 700 million by March 2020. Tesla’s revenue from China fell 13% last year to USD 1.8 billion, the company disclosed in a filing with the U.S. Securities and Exchange Commission on February 19.

NIO, which went public on the New York Stock Exchange in 2018, is considered Tesla’s main rival in China. The company’s 2018 Q4 fiscal report released on March 5 reported quarterly revenue of USD 499.7 million (RMB 3.4 billion) and a larger than expected loss of RMB 3.5 billion, an increase of 106.4% year-on-year. NIO’s stock slumped 19.6% to USD 8.17 per share on the same day it published the fiscal report.

 

3. Sales volume : Tesla delivered 11 times more vihecles than NIO in Q4 2018

Deliveries of ES 8 and Model 3 on Q4 2018.

Tesla delivered 90,700 cars in Q4, 2018, while NIO delivered  7,980 vehicles over the same period.

Still, Tesla is trying to sell more vehicles in China, recently announcing unprecedented price cuts as high as 30% for Model X, Model S, and Model 3 cars. For example, according to the company’s Chinese website, Tesla’s cheapest vehicle, the Model 3, now starts at RMB 407,000 (USD 60,600), down from RMB 588,000 (USD 87,550). The company also announced it will start delivering Model 3 cars in China ahead of schedule, as stores in China are reportedly receiving an overwhelming number of Model 3 orders.

According to NIO’s 2018 Q4 fiscal report, deliveries of the ES8 model have slowed faster than anticipated to just 1,805 and 811 vehicles in January and February, respectively. The company blamed the poor sales numbers on the consumption lull around Chinese New Year, as well as “The current slowdown of macroeconomic conditions in China, particularly in the automotive sector.” The startup also admitted that the disappointing sales might not let up, as deliveries in Q2 may continue to be weak.

Xu Haidong, assistant secretary general of the China Association of Automobile Manufacturers, said that Tesla’s localization will positively impact domestic EV makers, as it will intensify competition in the Chinese new energy vehicle market and force players like NIO to up their game.

 

( Top photo from AllTechAsia )

Yufan Zhou
Yufan Zhou

Yufan writes for AllTechAsia. She is studying Asian Studies in the School of Social Sciences at Waseda University. She is a foodie and MUNer. She is also interested in public administration, environmental development, and new media.

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