Tesla has no impact on EV prices in China, in contrast to the US, where it has a monopoly, according to William Li (Li Bin), CEO of NIO.
Tesla cannot affect EV costs in China, according to NIO CEO
Many EV manufacturers dropped pricing to compete after Tesla slashed costs on some of its most well-known models, including the Model 3 and Model Y, by up to $7,000 in January.
After speaking with dealers, Citi analyst Jeff Chung said that Tesla’s pricing reductions “had a negative spillover impact” that “suffered large order cancellations” for a number of China’s EV brands’ backlog of orders.
Since then, over 40% of EV and ICE brands, including BYD, have provided discounts or subsidies, according to Yicai Global. One of them was the EV startup XPeng, which offered up to $5,300 off some of the company’s most popular models in a subsequent wave of price reductions, indicating waning demand.
NIO, an electric vehicle manufacturer based in Shanghai, will not participate in the EV price wars, according to CEO Li Bin. Li recently stated at an industry conference that China’s brutal competition will result from blind price cuts. He added that NIO’s gross margins are now too low as they scale production to participate.
As compared to Chinese automakers like BYD, Li claims that Tesla’s “Model 3 and Model Y are less sophisticated in functionality and configurations, thus it cuts pricing to combat its rivals.” Added him:
Tesla has a customer base of almost 60% in the US, allowing it to set vehicle prices there, but only approximately 7% in China.
Strong Finish for NIO in the last quarter
To end 2022, NIO had consecutive outstanding quarters in Q3 and Q4. Last January, the NIO ET5 outsold the most well-liked petrol cars in China and rose to the position of second best-selling model among all mid-size sedans costing more than RMB 300,000.
However, NIO’s gross margins have decreased from 18.9% last year to 13.7% in the fourth quarter of 2022 as a consequence of rising lithium prices and vehicle improvements.
Li is optimistic that the EV manufacturer will turn things around and reiterates that NIO’s gross margins would range from 18% to 20% in Q4 2023 as the business expands operations.
Nio shipped 122,000 electric vehicles last year, up 24% from 2021, and during the initial three months of 2022, shipments increased by over 20%.
Tesla does, however, have pricing power in the US. The market leader in electric vehicles announced Q1 production and delivery figures on Monday, showing that the firm exceeded expectations by shipping a record 422,875 units, increasing the disparity in the US EV industry.
Elon Musk, the CEO of Tesla, has stated that he wants his organization to “become the best manufacturer on earth” and that this is what gives Tesla the most competitive advantage. With gross margins rising to 25.6%, among some of the highest in the sector, efficiency is paying off.
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