China’s Nio gears up to enter European car market

To anyone living outside China, Nio is a relatively unknown electric car brand, but within China, it is one of the most successful EV manufacturers in town.

Founded in 2014 by William Li, Nio is in the ascent in the world’s most populous nation, and now it is firmly setting its sights on expanding into the lucrative European electric car market for 2021. Many of Nio’s current models are powered by lithium-ion batteries, or indirectly water-cooled electric motors.

Up until now, China has been the exclusive market for Nio to roam around in, but now Nio is expected to start trial runs in European markets from the second half 2021 onwards, before a broader launch from 2022 onwards. Europe is an ideal place to expand for EV manufacturers like Nio – in 2019, over 500,000 EVs were registered in the EU alone, and that number is increasing each year.

Nio prepares to break new ground

Unlike more established EV brands familiar to European consumers, Nio models would have a different way of getting around. Makes from the likes of Tesla tap into a Supercharger network to power their vehicles. Nio, on the other hand, deploys battery-swapping, with an estimated 143 battery-swap stations set up across 64 Chinese cities, as of August 2020.

Reportedly, drivers can have batteries exchanged in as little as five minutes in these existing swapping stations. So far, Nio estimates they have swapped as many as 800,000 batteries as a result.

To be viable in a Western market, Nio may have to invest resources in building such stations in Europe, but this assumes they intend to retain the battery-swapping feature. The argument for battery swapping over charging one fixed in place from proponents of such models is that, with great advances in battery technology over time, it makes sense to avoid completely turning in your car, just to match these battery innovations.

Importantly, this battery-swapping approach does put Nio models at a premium compared to rival EV models, meaning Nio might be carving something of a niche for itself, when it finally reaches European markets.

Terms of trade

Nio’s move into the European markets needs to be seen in the right context. For the past couple of years, China and the US have been engaged in a trade war, costing billions of dollars in tariffs on goods flowing between the two countries.

As recently as 2019, Nio was reportedly on the brink of bankruptcy, with the trade war and the COVID-19 slowdown biting into profitability, while causing sales to plummet. Now, Nio has enjoyed a sudden reversal of fortunes, with its share price soaring, giving it a current market cap of $93 billion – equivalent to General Motors and Ford combined. Questions remain about whether a surge in sales will justify this lofty valuation, or whether Nio is a bubble in the making.

The Chinese Government plays a significant role in subsidising sectors to prevent them from falling into ruin, such as the EV sector. Nio took government support worth $1 billion to weather the COVID-19 disruption, but as we enter 2021, Chinese authorities look keen to wean businesses off this government support. The coming 12 months will suggest how sustainable Nio’s approach to EVs truly is, as it breaks into new markets.

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