Nio’s European road trip will earn bragging rights


William Li, founder and CEO of Chinese electric vehicle maker Nio Inc, speaks at the company’s product launch event in Chengdu, Sichuan province, China on January 9, 2021. REUTERS / Yilei Sun – RC2D4L9FSZAK

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HONG KONG, Jan.4 (Reuters Breakingviews) – Chinese electric car maker Nio (NIO.N) to revamp its brand with an expedition to Europe read more. William Li’s roughly $ 60 billion brand can deploy extravagant marketing and service to gain overseas fans. While it may take years to capture a significant share, by 2022 even modest overseas sales will increase its stock.

Li first outlined his plans for foreign conquest in March. Six months later, he had moved to Norway, where battery cars are already selling more than heavy gasoline consumers. Li wants to move over more difficult terrain, entering five more European countries in the coming year.

The grand tour won’t be cheap. Nio follows a roadmap designed for China, where it has built its brand from scratch. This means opening flashy “Nio houses” – exclusive and remarkable club-showrooms at prestigious addresses. Renting such premises in cities like Berlin could cost as much as 2 million euros per year, estate agents estimate. Time-consuming after-sales services such as delivering batteries on demand will also increase costs.

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But cracking Europe is essential for Nio and its rivals like Xpeng (9868.HK) and WM Motor. In 2020, when consumers spent $ 120 billion on electric cars, according to the International Energy Agency, the region accounted for almost half of the vehicles sold. Meanwhile, the domestic market is increasingly crowded as hundreds of local startups compete with titans such as Volkswagen (VOWG_p.DE) and Tesla (TSLA.O) eyeing a piece of the People’s Republic. In response, the big Chinese brands are heading in the opposite direction. In the long run, Nio estimates that half of its sales will come from outside of China.

Tesla’s early days in China provide an interesting lesson. In 2015, a year after his arrival, he declared $ 300 million in Chinese revenue. While this represents just 8% of Tesla’s revenue, it laid the groundwork for the Musk brand to become the world’s best seller. Nio may sell 11,000 units in Europe to achieve a similar result on its first forays overseas, assuming revenue is similar to Refinitiv’s forecast for 2022. Such early success would put Nio far ahead of most markets. rival Chinese companies.

The hype around Nio’s national outlook has already increased its valuation tenfold in the three years since its listing at $ 7 billion in New York City. Even a modest road trip overseas will cause stocks to overdrive.

(This is a Breakingviews prediction for 2022. To see more of our predictions, click here.)

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NEWS CONTEXT

– The Chinese electric vehicle maker opened its first Nio House showroom in Norway on September 30. The company plans to enter five more European markets in 2022, chief executive William Li said on November 9.

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Editing by Ed Cropley and Thomas Shum

Reuters Breakingviews is the world’s leading source for financial calendar information. As the Reuters brand for financial commentary, we dissect the big companies and economic stories from around the world every day. A global team of around 30 correspondents in New York, London, Hong Kong and other major cities provide real-time expert analysis.

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