https://qz.com/1608353/chinese-ev-maker-nio-thinks-cars-should-be-assembled-like-iphones/ Why a Chinese electric vehicle startup thinks cars should be assembled like iPhones 2019-05-27 Echo Huang
[images https://cms.qz.com/wp-content/uploads/2019/04/NIO-Shanghai-Auto-show-2019-e1557217290855.jpg https://cms.qz.com/wp-content/uploads/2019/04/Sun-E-2018-1.jpeg ] “While China has equivalents like Xiaomi, Huawei, JD to compete with America’s iPhones and Amazon, China has nothing to compare with German’s BMW or General Motor’s Cadillac,” he said, even after “years of effort, including exchanging market (access) for technology.” “I believe in NIO, Lihong and bin ge,” said Sun, who was among the 12 customers invited to ring the bell in New York when NIO went public in September (he says he doesn’t own any company stock). “I really wish I could even purchase a house built by NIO.” There are “NIO Houses” in fact—private club-like spaces to display its cars and offer membership perks, such as a drop-off area for children between the ages of 3 to 12 fro 10am to 10pm. These are usually located in high-end office buildings or downtown business areas—the newest one opened last year in Shanghai Tower, a skyscraper located in the financial hub of the city, where it occupies about 1,300 square meters (14,000 sq ft) on the ground floor. Rental site Fang.com shows that rents for 1,000 sq mtr office in the same building are nearly 450,000 yuan a month (link in Chinese), or close to the sticker price of an ES8. And unlike traditional carmakers, who sell through dealerships, every car owner at NIO has a one-on-one sales person (link in Chinese) who handles after-sales services, Zhang Xiang, an adviser to China’s Ministry of Industry and Information’s auto talent exchange center, which connects researchers with institutes (link in Chinese), told Quartz. All of that adds up. Operating expenses for sales and administration came to nearly $780 million (pdf, p.5) last year, when it sold close to 11,350 ES8s, or 1% of China’s total new energy passenger car sales, including battery and hybrid ones, in the same period. “The advantages of EV startups is that they are using various kinds of car functions and better quality services to attract customers, but that can’t last long,” Zhang said. “In the short term, you can sell cars using the ‘fan economy,’ in the long term, you must rely on the economy of scale.” China’s decades-long effort to catch up with the rest of the world on producing fossil-fuel cars has never been much of a success. Drivers, enthusiasts and industry watchers still look to Japanese, Germany, and American brands as the gold standard. When it comes to electric vehicles though, China hopes to leapfrog the West by introducing new ways to make and market EVs. Now it’s at a turning point. Next year, the government is ending the subsidies that have supported the industry’s growth, dangling a question mark over the future of the country’s almost 500 EV makers. The biggest companies are certain to weather the ride, but what of the new players, inspired as much by China’s new internet economy as its powerful manufacturing base? The most prominent of these is NIO—a five-year-old startup making its name as a premium brand—which has cultivated a devoted fan base, and managed to meet its delivery goals for last year, all without even having its own factory. The question now is how sustainable NIO’s path can be. Startups like NIO don’t have traditional manufacturing experience and are burning cash to build market share just as China’s auto market is slowing down. Last year the company had a net loss of $1.4 billion, and the stock is now at around a third of its all-time high when it listed on the Nasdaq in September. It just closed its San Francisco office, shedding about 70 employees (pdf, p. 13) there and in Silicon Valley as part of a 3% layoff this year. NIO is due to update investors on where things stand with its two-pronged approach on Tuesday (May 28), when it releases its first-quarter earnings. Assembling cars like iPhones Companies like NIO are reshaping China’s auto industry in the mold of the tech industry—with executives coming from China’s internet companies, they understand users, but not necessarily car manufacturing, a capital-intensive process. Chinese social media giant Tencent is one of its major investors, while search service Baidu is another. “Manufacturing is only part of the value chain,” says Qin Lihong, NIO’s co-founder, in an interview with Quartz during the Shanghai auto show in April. “I don’t think (factory) ownership matters. It’s like Apple has iPhones but it doesn’t make them, yet Apple has the best manufacturing capabilities. (Taiwan’s) Foxconn built factories for them, it has the biggest capacity and manufacturing capability, and quality… (those) who work under you don’t necessarily follow your orders better than a partner.” He added that NIO needs to be an excellent organizer on the manufacturing side—but focus on developing the core technology and the user experience. The stance may also be a case of making a virtue out of necessity. Unlike established homegrown or foreign carmakers, many of China’s EV startups aren’t getting licenses to make their own cars due to new government restrictions aimed at curbing overproduction. As a result, companies like NIO have formed joint ventures with existing carmakers and put plans to develop their own facilities on the backburner. Until existing plants reach a certain capacity—such as Tesla’s upcoming Gigafactory in Shanghai—new factories won’t get the go-ahead. NIO develops models at its pilot car facility in Nanjing, and has partnered with state-owned JAC Motors to produce them. In addition to the per vehicle costs, the arrangement involves covering operating losses for JAC till 2021 (pdf, p.16) for the plant that builds NIO’s electric SUVs. For the second quarter of 2018, NIO said it had paid its partner 65 million yuan ($9.4 million) towards losses it incurred. Zhou Deming, an analyst at Shanghai-based investment firm San Sheng Hong Ye, said that outsourcing manufacturing makes sense when it’s with a third-party that specializes in manufacturing for others, like Canadian auto supplier Magna International, which builds cars for German brands like Mercedes Benz and BMW. JAC, meanwhile, makes its own cars that could compete directly with NIO. Working with a partner could also mean challenges when it comes to quality control, Yang Jing, a corporate analyst at Fitch Ratings in Shanghai, told Quartz, but it does give EV startups more flexibility while scaling up. In its IPO filing in July last year, NIO said that setting up its own factory in Shanghai by the end of 2020—which it planned to lease from local authorities, while leaving the construction to them—would cost $650 million (pdf, p. 94) for equipment and improvements. Still, some of NIO’s investors aren’t convinced. Soon after NIO said in March that it would not proceed with its own factory in Shanghai, shareholders in the US brought a class-action lawsuit against the EV maker, claiming NIO misled investors by failing to disclose that earlier. Qin said the company has been truthful in its financial statements. Learning from the internet “fan economy” Until recently, Tesla’s high-end EVs at one end, and the locally-produced and affordable BYD at the other end, have been front of mind for Chinese customers. NIO’s trying to bridge that gap by building a strong fan base, to some extent again adopting from China’s internet “fan economy,” where influencers build emotionally attached followings with constant online contact. “We are a company with the genes of the internet, that means no one else touches our users,” said Qin, citing as an example the app that NIO developed to connect directly with car owners for services. Sun E, who’s in the food import business, experienced first hand NIO’s personal touch. He attended at least five offline events the carmaker organized, including a tour of NIO’s offices, and several test drives before he decided to become one of the first customers of its seven-seater SUV ES8 for nearly half a million yuan ($74,000). Already the owner of a Japanese Infiniti, the 36-year-old said he was looking for something beyond BYD—a “relatively low-end” brand—yet something more affordable than a Tesla, whose premium Model X SUV starts at above $100,000 in China. In an interview with Quartz at the Shanghai auto show, Sun referred to billionaire founder William Li (Li Bin) as bin ge, or brother Bin, and said he thinks NIO can fill a void in China’s auto industry. “While China has equivalents like Xiaomi, Huawei, JD to compete with America’s iPhones and Amazon, China has nothing to compare with German’s BMW or General Motor’s Cadillac,” he said, even after “years of effort, including exchanging market (access) for technology.” “I believe in NIO, Lihong and bin ge,” said Sun, who was among the 12 customers invited to ring the bell in New York when NIO went public in September (he says he doesn’t own any company stock). “I really wish I could even purchase a house built by NIO.” There are “NIO Houses” in fact—private club-like spaces to display its cars and offer membership perks, such as a drop-off area for children between the ages of 3 to 12 fro 10am to 10pm. These are usually located in high-end office buildings or downtown business areas—the newest one opened last year in Shanghai Tower, a skyscraper located in the financial hub of the city, where it occupies about 1,300 square meters (14,000 sq ft) on the ground floor. Rental site Fang.com shows that rents for 1,000 sq mtr office in the same building are nearly 450,000 yuan a month (link in Chinese), or close to the sticker price of an ES8. And unlike traditional carmakers, who sell through dealerships, every car owner at NIO has a one-on-one sales person (link in Chinese) who handles after-sales services, Zhang Xiang, an adviser to China’s Ministry of Industry and Information’s auto talent exchange center, which connects researchers with institutes (link in Chinese), told Quartz. All of that adds up. Operating expenses for sales and administration came to nearly $780 million (pdf, p.5) last year, when it sold close to 11,350 ES8s, or 1% of China’s total new energy passenger car sales, including battery and hybrid ones, in the same period. “The advantages of EV startups is that they are using various kinds of car functions and better quality services to attract customers, but that can’t last long,” Zhang said. “In the short term, you can sell cars using the ‘fan economy,’ in the long term, you must rely on the economy of scale.” NIO’s aware of that, and is rolling out the ES6, a compact SUV for the the 300,000 yuan ($45,000) market next month. Qin said NIO’s aiming to take a 3% share of the 700,000-strong compact SUV market in China. Last-resort IPOs? Given that NIO’s listing only raised $1 billion of the $1.8 billion it hoped for to fund its expansion, it seems an odd time for other EV startups with less of a delivery record to be talking about IPOs. Yet Guangzhou-based Xiaopeng, Shanghai-based WM Motor, Byton, and Beijing-based Chehejia have all talked about possible listings. It’s a sign that the industry is hard-pressed for cash as government subsidies dry up, said Neil Wang, greater China president of consulting firm Frost & Sullivan. “IPO in this regard is an efficient financing channel,” he said. Like NIO, Xiaopeng doesn’t have its own manufacturing factory yet. WM Motor delivered around 4,000 cars in the first quarter of 2019, while Chehejia and Byton, have yet to enter mass production. “(Of the) new EV makers, at best we see five will survive, at worst there could only be two or three,” said Zhou, the Shanghai investment analyst. [© qz.com] + https://www.electrive.com/2019/05/27/china-hyundai-konda-electric-driving-on-catl-batteries/ China: Hyundai Konda Electric driving on CATL batteries May 27, 2019 The background is that the Chinese government decided in 2016 to remove electric vehicles with batteries from Samsung or LG Chem from the subsidy list in its ... https://www.electrive.com/wp-content/uploads/2018/04/hyundai-kona-elektro-elektroauto-electric-car-04.png For EVLN EV-newswire posts use: http://evdl.org/archive/ {brucedp.neocities.org} -- Sent from: http://electric-vehicle-discussion-list.413529.n4.nabble.com/ _______________________________________________ UNSUBSCRIBE: http://www.evdl.org/help/index.html#usub http://lists.evdl.org/listinfo.cgi/ev-evdl.org Please discuss EV drag racing at NEDRA (http://groups.yahoo.com/group/NEDRA)
