NIO is a Chinese startup that aims to “build smart electric and self-driving cars.
The company opens the about page of its website with the statement below.
The future is in smart, electric and autonomous vehicles, and we aim to lead the way.
The word “autonomous” is important in this statement. And it is precisely in that word “autonomous” that lies the difference with most other manufacturers of electric cars (except Tesla, of course).
Let there be no mistake about it. NIO currently has electric cars on the market with a lot of technology on board, only in China, but they are not yet self-driving. It does intend to do this in the future. When? And will it ever come to that? Judge for yourself after reading this blog.
The name NIO would be a distortion of the Greek neo what newly means.
The Chinese name was chosen for Weilai, what stands for future. NIO gives it the meaning of Blue Sky coming, which refers to a cleaner future.
Their logo also reflects “Blue Sky coming”. The bow represents the blue sky. The base, an inverted V, is a symbolic representation of the solid ground, the Earth.
In 2014, Li Bin (William Li) founded the startup Next EV on. In 2016, the name was changed to NIO. Headquartered in Shanghai, NIO had around 9,000 employees at the beginning of 2019. This number was reduced to 7500 due to a chronic cash burn at the end of 2019 (see NIO financial - cash burn below).
With a view to developing self-driving cars, much attention is being paid to R&D with centers in Shanghai, Beijing, San Jose (US) and Oxford (GB). The design center is located in Munich (D).
NIO does not have its own factory. It has its vehicles built by JAC Motors, a 50% VW and 50% state-owned car manufacturer.
The NIO EVs (Electric Vehicles) are now only available for purchase in China. It is probably Tesla's biggest competitor there at the moment. In the long run, NIO wants to sell its cars around the world. It would be active in Europe as early as 2021. This is followed by the US and later the rest of the world.
NIO's major shareholders include Chinese internet giants Tencenten Baidu and the Chinese government.
NIO currently does not produce self-driving EVs, but smart EVs. The self-driving ones are still in the R&D phase. But don't underestimate the NIO EVs. With 'NioPilot' and 'NOMI', you get a lot of smart automated driving and comfort assistance systems.
Nio Pilot has to name just a few
- a cruise control that adjusts the speed to the vehicles in the immediate vicinity.
- a self-parking assistant.
- automatic lane control.
- a warning of dangerous situations
- an automatic brake that activates in the event of an acute danger.
With NOMI Mate 2.0, you have AI (Artificial Intelligence) and “voice interaction technology” on board. By the way, the word NOMI has no meaning in itself. These are the sounds with which some Chinese say “know me”. Do you have it?
And indeed, NOMI gets to know the voice and preferences of the driver. Will recognize him when you get in and immediately set a number of things (e.g. temperature, ventilation, seat and steering position,...). On voice commands, NOMI will open the windows, turn on the radio, select a frequency, turn the sound louder or quieter, set the GPS, guide you to the nearest charging station, etc. There is a recognition of and interaction, a kind of relationship between the driver and the car.
The EC6, ES6 and ES8 models on sale are 100% electric, smart, but not yet self-driving. All three have a top speed of 200 km/h and all models are equipped with “Neo Pilot” and “NOMI”. When it comes to safety, NIO scores 5 stars (highest score) for the European NCAP safety criteria.
A 544 hp SUV coupe, 5 seats, range 615 km, 0-100 km/h in 4.5 seconds.
A 544 hp crossover SUV, 5 seats, range 615 km, 0-100 km/h in 4.7 seconds.
A 650 hp crossover SUV, 7 seats, 580 km range, 0-100 km/h in 4.9 seconds.
The EP9 is a electrically driven experimental sports car with self-driving technology on board. Only 16 pieces of this have been made. Of these, 6 were sold to the company's investors. The other 10 are or have been sold to the public. Target price: 1.1 million euro.
The EP9 has 4 engines, together producing 1360 hp, accelerating from 0 to 200 km/h in 7.1 seconds. It reaches a top speed of 313 km/h. The battery can be fully charged in 45 minutes and, according to NIO, the range is up to 427 kilometers.
This EP9 proves that NIO doesn't just counterfeit. As early as 2017, this car won the lap record of the Nurburgring Nordschleife (20.8 km) with a time of 6:45:90. This was 6 seconds faster than the previous record set by the Lamborghini Huracan Performante, a fuel-powered sports car. Also in 2017, the EP9, at the Circuit of the Americas Race Track in Austin Texas, beat the lap record for self-driving cars with a time of 2m40.33s.
In specialized magazines, we read:
“... the ES8 has eye-opening on-road performance.”
“... this is the most refined Chinese car we've yet seen.”
“... the time when the Chinese made cheap copies of Western cars is over.”
We note, however, that the NIO EVs do not quite have the sophistication and efficiency of, for example, the Audi e-Tron GT, or the Mercedes EQC, and certainly not the Tesla model 3. But you do have them (in China) for about half the price of the others. And of course, NIO is also technologically very far behind the superior Tesla Model 3.
The question remains to what extent NIO will compete with Tesla and everyone else. Because don't forget, all the major car brands are already making and selling EVs.
In the top 20 best-selling EVs, we found NIO 19th in mid-2020.
Since its inception, NIO has had a cash burn of 6.2 billion (June 2020). This, of course, causes an enormous debt burden. As of June 2020, NIO's LT debt was $4.1 billion.
In the last 4 financial years, NIO also suffered huge losses (EBIT)
2017: $733 million
2018: $1.45 billion
2019: $1.6 billion
2020: $750 million (forecast)
Now (2020), NIO is still losing more than $20,000 per car sold
Due to this continuous cash burn, NIO has had one round of funding after another in recent years. Over and over again, billions of dollars were refueled. In the first 9 months of 2020 alone, NIO raised 3.6 billion dollars in 6 funding operations. In December, an additional 2.7 billion was raised by issuing an additional 68 million shares.
The funding comes from strategic partners, major investors, issuance of additional shares and from the Chinese government.
The additional shares that are issued mean a downgrading of the existing shares. Support and funding from the Chinese government means that NIO largely loses its private character and becomes more dependent on that same government. And of course, these loans result in additional debt. It is estimated that NIO's total debt would rise to 11.4 billion dollars this year.
It is not very clear what NIO will use these extra funds for. The company summit did say that the self-managing aspect would be a priority for 2021.
Cash burn is a pressing problem for NIO and a threat to its survival.
An electric car contains a battery pack, a cluster of multiple batteries. This battery pack is the heaviest and most expensive part of an electric car by weight.
The energy content expressed in kWh largely determines the car's performance, range, acceleration and speed.
However, it is not these issues that will make a difference in the future. With the exception of Tesla, most EV manufacturers source their batteries from specialized third parties.
However, the speed at which the battery can be recharged is very important for the buyer.
Today, the recharge times are: 30 minutes to 10 hours, depending on the installation used and the battery. Tesla is currently the outspoken champion in this regard. But here, too, I expect the differences to flatten out in the future. Or...?
In 2013, Tesla worked on battery swap technology. What is battery swap? Instead of recharging an EV battery, you drive into a station where the empty battery pack is removed and replaced with a fully charged one.
In 2016, however, Elon Musk decided not to elaborate on this idea and to focus 100% on optimizing the batteries themselves and on the process of reloading.
Since its inception in 2014, NIO picked up this idea. They call it “Power Swap”.
Currently (June 2020), NIO already has a “PowerSwap Stations Network” in the wider Shanghai region with 156 stations in 59 cities and intends to expand it rapidly.
In a Power Swap Station, a robot replaces the battery pack in just 5 minutes.
Waiting for the battery to recharge, even if it's only 30' (by far the most expensive option) is an uncomfortable and annoying issue.
With 'Power Swap', you'll be back on your way in 5 minutes.
To encourage the population to buy EVs instead of fuel cars, China grants subsidies to EV buyers. A condition for obtaining the subsidy is that the car must cost a maximum of $42,376.
A line through Tesla's bill. Only the absolute base Tesla Model 3 model (made in China) with a standard range and cost $40,000 meets this requirement. The longer range models cost up to $50,000 in China.
The cost of the NIO cars also does not meet the limit of $42,376. But then, thanks to the 'Power Swap', the trick with the pigeon comes. NIO offers the possibility to buy a car without a battery and also lease the battery. This results in a price reduction of $10,000 to $15000. Therefore, buyers of NIO-EVs (without a battery pack) do meet the subsidy limit.
Is cancelling Tesla in this way in favor of NIO, just a coincidence? Or, with the cooperation of the Chinese government, is it a deliberate, well-thought-out strategy?
NIO is currently still a relatively small loss-making startup with financial problems and competition from major players.
Let me start by saying that when it comes to smart or self-driving EVs, Tesla is currently Goliath and NIO is David. In 2019, Tesla sold 367,500 of its Model 3 units worldwide (including 30,000 in China). NIO sold 20,565 units, only in China.
NIO only sells on the Chinese market anymore. It has yet to demonstrate that it is able to take the step to the global market. The plan is to be active in Europe in 2021 and in the US in 2023.
NIO does not have its own factory. This also means that they are dependent on third parties and do not control the efficiency and improvement of the production process either.
A major problem for NIO lies in the continuing loss-making and the high debt burden. The loss was significantly reduced this year (2020), but it is still significant.
Questions that need to be asked. How quickly can losses be reduced? Is a turn around possible in the relatively short term? How much longer are investors willing to pump money into NIO? Can NIO survive financially on its own?
Since November 2020, Tesla has had its own factory in Shanghai for its Model 3. It will export the EVs produced there to 10 regions including Europe.
But the largest EV manufacturer in the world is also a Chinese company: BYD (Build Your Dreams). This company has Warren Buffet's trust. In 2019, BYD sold around 400,000 electric cars worldwide, not directly smart cars but full electric ones.
BYD does have its own factories and also makes its own batteries. It employs around 250,000 people. As early as 2018, BYD, together with Baidu (the Chinese Google), announced that it would launch self-driving cars within 3 years. Now - December 2020 - a press release was published that Baidu will develop self-driving cars. Tencent also has plans in this direction.
NIO must therefore compete against major players such as Tesla. But also against the established premium car brands that don't sit still when it comes to EVs and smart and self-driving EVs either.
China is very ambitious when it comes to electric vehicles, and offers automakers enormous profit potential due to the size of the market. This finding may be positive for NIO with regard to its chances of survival.
