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Automakers borrowing Musk's strategy to expand in market

By LI FUSHENG | CHINA DAILY | Updated: 2022-05-16 10:47

Nio's plant in Hefei, Anhui province, is under operation. [Photo/Xinhua]

The business plan Elon Musk wrote 16 years ago for Tesla goes like this: create a low volume car, which would sell at an expensive price; use that money to develop a medium volume car at a lower price; use that money to create an affordable, high volume car; and provide solar power.

Now their major Chinese rivals are taking similar steps, or at least the first three of them, to be specific, to explore the vast potential in the volume car segment of the country's new energy vehicle market.

New York-listed Nio said last week it will roll out more affordable vehicles in two years to "take on international carmakers including Tesla and Volkswagen".

A core team has been set up, and research and development regarding the first models has entered into the critical stage, said the startup who saw its accumulated production hit 200,000 units in late April.

These models will bear a new marque and their production is expected to start in 2024 at a plant located in East China's Anhui province, said Nio.

The Shanghai-based carmaker first mentioned the intention to launch a second marque in the second half of 2021.

Tesla's most popular model is the China-made Model 3 sedan, priced from 290,000 yuan ($42,640). Volkswagen ID. series electric SUVs' starting prices are even lower, at around 200,000 yuan.

Nio labels itself as a rival to premium brands such as Mercedes-Benz and BMW. The carmaker said the average price of its models sold is more than 400,000 yuan. Even the most affordable one, the ET5 sedan, has a sticker price starting from 328,000 yuan.

Models under the new marque, whose project name is Alps, will be between 150,000-300,000 yuan, the China Business News reported.

This price range is like the middle part of the dumbbell-shaped Chinese NEV market, according to Cui Dongshu, secretary-general of the China Passenger Car Association.

So far the most popular models are affordable mini-sized vehicles like Wuling's hit Hongguang MINI.They are followed by those from premium brands and local niche startups, while there are fewer choices in the volume car segment.

Statistics from the China Passenger Car Association show NEVs accounted for 48.8 percent of Chinese carmakers' sales, the figure was 5.5 percent for premium brands including Mercedes-Benz and BMW, and it was only 3.7 percent for volume brands like Volkswagen, Ford and Toyota.

Cui said that the middle part of the "dumbbell" will grow fast in the coming two to three years and turn the market into the oval shape, as these volume brands have started to launch electric models.

Li Auto, a Nasdaq-listed Chinese startup, is planning to explore both upward and downward in the fast-changing NEV market.

"We will adopt a product plan like Apple," said Li Xiang, CEO of Li Auto, after the carmaker released its Q1 financial results.

"You know, they have the iPhone 12 Pro Max, the iPhone 12 Max, iPhone 12 Pro, iPhone 12 and iPhone 12 Mini. And we are going to launch models at different price ranges as well," said Li.

The carmaker now has only one model, the range-extended Li One SUV, but its deliveries from January to March totaled 31,716 units, up 152.1 percent year-on-year.

Li said the model accounted for more than 30 percent of the NEV segment priced between 300,000-400,000 yuan in 2021.

"Our initial positioning was good, so we can move upward to the range of 400,000-500,000 yuan and also downward to 200,000 yuan," said Li. The startup is planning to launch the L9 SUV in the third quarter. Like the Li One, it is a range-extended SUV as well, but it has bigger dimensions and better technology. So it is expected to be more expensive, but the carmaker has not given any official information about its price so far.

Besides range-extended models, Li Auto is planning to roll out electric vehicles as well.

Electric cars have been seizing the lion's share in China's NEV market. Statistics from the China Association of Automobile Manufacturers show that 1.53 million passenger NEVs were sold in the first four months this year, of which 1.21 million were electric cars.

The association expects total NEV deliveries to reach 5 million this year.

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