Written by Cláudio Afonso | LinkedIn | X
In May — a few months before celebrating its 10th anniversary — electric vehicle maker Nio became a group with the launch of Onvo, its first sub-brand. Next year, a second one will be unveiled allowing the brand to compete in different market segments.
In an interview that followed the recent launch of Onvo’s first model, the group Founder and CEO William Li was asked about the competitive advantage that differentiates Nio and Onvo brands.
“In today’s less-than-ideal and somewhat irrational automotive industry, Onvo’s pricing has further raised the bar. What is the moat for the Nio and Onvo brands?,” the journalist asked the CEO.
China’s media outlet IT Home published on Sunday a transcript in which William Li explains Nio’s significant investment in research and development (R&D) in recent years, the advantages of its battery swap technology, and the company’s path to profitability.
“We have endured a lot over the years. Our peers are excellent, and many people try to deconstruct and criticize us. Our approach, however, is not to deconstruct, but to openly and happily compare. We don’t engage in backhanded tactics; we generally prefer open, honest communication,” Li stated.
As the company fights to become profitable, the chief executive reiterated that the automotive industry is “capital-intensive.”
“Some people livestream, claiming we are losing money. At our current scale, if we were making big money, that would actually be a problem. The automotive industry is capital-intensive, technology-intensive, talent-intensive, and has a very long supply chain,” he said before making a comparison with China’s Chery Group.
“Companies in this industry have a history spanning decades, even centuries. Recently, I had a test drive conversation with Mr. Yin from Chery, and I said to him, ‘You’ve been doing well lately.’ He replied, ‘I’ve been at this for 27 years; the first 24 years were tough, and only in the last two or three years have things slightly improved,’” Li told.
Founded in 2003, Tesla reported its first annual profit in 2020, earning $721 million, in contrast to its $862 million loss in 2019.
“Even Tesla took 16 years to turn a profit. I think this reflects the reality of the automotive industry — there’s no quick success, no shortcuts,” Li stated before reiterating his high ambitions.
“Maybe five or ten years from now, while other hotels are up and running and making money, your building is still under construction. What does that matter? I’m not aiming to build a ten-story building; I’m aiming to build a hundred-story building,” Nio’s chief executive said.
Focusing on the battery swap technology, the executive returned to Tesla’s example as the company led by Elon Musk explored, in the early days, the same technology that Nio.
“We’re doing battery swapping because it fits the needs of the Chinese market and customer scenarios. I spent three years studying battery swapping — not successful cases, but failed ones,” Li stated.
“A few days ago, a user mentioned that Tesla tried to implement battery swapping but gave up. It wasn’t that they gave up; they just couldn’t pull it off, or they realized that their cars weren’t designed for it and the cost was too high. But we started from scratch with an original design, so it’s easier for us to push it forward,” he added.
Li followed indicating three points that resume the company’s thinking.
“Our thinking is very simple. First, start with the customer’s interests, which are written into the company’s vision. Secondly, ensure commercial sustainability,” he said before addressing the comments on social media.
“Although the whole internet is teaching me how to be a CEO, I’m someone who has actually made money. Wouldn’t I consider commercial sustainability? I’m not a fool; we know how to calculate, but we calculate for more than just a quarter or a year,” Li stated.
Nio’s founder continued to focus on the path to profitability topic mentioning both Tesla and Amazon Web Services saying they need 16 and “over 20 years” to become profitable, respectively.
“Commercial sustainability is important, but you have to view it through the lens of time. Any business that makes money from day one is probably not a good business. Amazon Web Services lost money for over 20 years, Tesla for 16 years, and we’ve been losing money for over nine years,” Li said before noting that R&D plays a big role in Nio’s investment.
“We raised $18.9 billion globally and brought it to China to develop the intelligent electric vehicle industry here. Most of our investment has gone into fundamental R&D. Even if these employees no longer work at Nio, they’re still important seeds. Even if our supply chain serves others, we’re still happy because we’ve driven many innovations in the supply chain,” he noted.
Mentioning Onvo’s decision to offer a [smaller than usual] 60kWh battery for the standard range option as an example, Li said the range achieved with that battery is enough for most customers and their daily needs.
“Third, it [the business] must benefit society and be sustainable. Why did we set the Onvo’s base range at 60 kWh? Because over 500 kilometers is enough for users’ daily needs. Swapping or charging a few times a month is sufficient, and for long-distance trips, they can switch to the 85 kWh or future 1,000-kilometer range batteries. Think of the resources saved,” he said.
“Thanks to battery swapping, 97 per cent of our customers opt for the 75 kWh option, and only 3 per cent go for the 100 kWh version. This not only saves customers money but also conserves a lot of societal resources,” he added before focusing on the battery lifespan.
“As for battery lifespan, batteries age too. Shouldn’t we address that? Over the past eight years, there have been nearly 20 million new energy vehicles in China. In the next eight years, these 20 million vehicles will gradually go out of their battery warranty,” he warned.
“Shouldn’t we solve that problem? A battery pack costs over 60,000 yuan ($9,000), so that’s about 1.2 trillion yuan ($170 billion) in total. Shouldn’t we find a solution for that?,” he questioned.
“So, in short, Nio’s way of doing things benefits customers, ensures sustainable business operations, but under proper evaluation cycles, and fosters societal and industrial sustainability. That’s just how I think, and I believe my thinking is correct. Should I be dishonest about that?,” the chief executive concluded.
Last week, Belgian media outlet De Tijd reported that Nio was in discussions with Volkswagen Group to acquire Audi’s soon-to-close factory in Belgium.
Speaking to media immediately after the Onvo L60 launch event, Nio Group CEO William Li denied the report saying the EV maker is “cautious about investing in fixed assets” with one exception.
Written by Cláudio Afonso | LinkedIn | X
