China electric car maker Nio’s expansion into the US EV market, sets up a potential showdown with market leader Tesla on its home turf.
China’s ninth-biggest EV company leased a 201,500 square-foot building in San Jose, California, for 10 years, from property agency Colliers in January. The building will be used by Nio as a Research and Innovation Center to support functions including research and digital development, testing, assembly, warehousing and operations, Colliers said.
Nio has also advertised for staff in San Jose with dozens of positions, many of them senior posts, listed on LinkedIn. As of mid-January, the electric car maker’s website also listed five open roles on a team described as “responsible for the strategy, planning and execution of NIO’s go-to-market for the Americas.”
“Nio probably sees no reason why it can’t compete on Tesla’s home territory,” says David Whiston, Equity Strategist for US Autos with Morningstar Research Services in Chicago. “They are interested in growth and a key EV market outside China is the US.”
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Nio didn’t respond to inquiries about its US operations but Colliers Senior Vice President Sean Toomey said in press release that it was honoured to have “guided Nio USA through its successful search for a new headquarters facility in support of Nio Inc’s international market expansion.’’
Chinese EV companies have so far made no inroads into the electric car market in the US, choosing to target European markets for their initial forays into western countries.
EV Sales Booming in US Market
The lure of the US EV car market is understandable. Sales of electric and hybrid vehicles are booming and getting a boost from government policy. US hybrid car sales jumped 76% in 2021 to over 800,000 units, accounting for 5% of all US light vehicle sales, according to Wards Intelligence.
Electric vehicle (EV) sales grew even faster at 83% to over 430,000 vehicles. Toyota reported US sales of hybrid cars, plug-in hybrid electric vehicles (PHEVs) and fuel cells expanded by 73%, while Honda reported hybrid sales grew some 67%.
Hybrid vehicles use both gasoline and battery power, EV cars use only electric battery power, PHEVs use batteries that can be charged externally.
Whiston says competition is already stiff in the US electric car market and will likely intensify as legacy automakers – think GM, Ford and some of the German giants – enter the fray. “It’s going to be hard for smaller firms to get a liveable piece of the pie in terms of volume,” he said.
A key challenge for Nio cars will be that Americans have been buying more hybrid vehicles than electric ones. The Biden administration has set aside $7.5 billion in its infrastructure bill to build electric vehicle charging stations across the country to make it easier for drivers to charge, but that won’t help Nio, as its business model focuses on battery swapping.
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The ability to swap out a depleted battery at a swap station in a few minutes is a unique feature of Nio’s electric cars – but this could be a double-edged sword. While swapping batteries is immediate, instead of plugging in and waiting, the approach also means Nio has to build out – and maintain – swapping stations for its electric cars across the expanse of the US.
This battery swap may well work in smaller countries and where populations are relatively concentrated, such as Norway, but may not work as well in the dramatically larger and much more sparsely populated US.
Nio went international when it entered Norway last year. It has publicly said it plans to expand to offer electric vehicles in Germany, the Netherlands, Sweden and Denmark in 2022, and into a total of 25 countries by 2025.
The electric car maker did not provide specifics on the other countries, but a map the company put on a screen at its annual Nio Day investor conference in December highlighted several markets for its electric vehicles, including Western Europe, Australia and the US.
Tesla ranked third among electric car makers in China last year with 320,743 sales, up 133.3%, but still behind Warren Buffett-backed BYD and Wuling. Nio ranked ninth with sales of its electric cars totalling 91,429, up by 109.1%.
• By Neal McGrath
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