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ANALYST: Here's why Nio isn't the Chinese Tesla 'killer' (TSLA, NIO)

Ethel Jiang
FILE PHOTO: People gather at the booth of Chinese electric vehicle start-up Nio as it unveils its ES8 SUV at the Shanghai autoshow, in Shanghai, China April 19, 2017. REUTERS/Aly Song/File Photo
  • Chinese electric-car marker Nio is not a Tesla "killer" according to Berenberg.
  • Right now, Nio is dominating China's market, while Tesla only has around 15% of group sales from China, Berenberg analyst Alexander Haissl said.
  • Tesla's Model X has more than double miles of Environment Protection Agency range — an estimate of the number of miles the electric vehicle should be able to travel from a full charge — than Nio's ES8, Haissl added.
  • Watch Nio, Tesla trade in real time here.

People should stop citing the Chinese electric-car maker Nio as the Tesla "killer" because the two brands are not directly competing with each other, according to Berenberg.

"We do not consider Nio a major threat to Tesla given its rather limited market and product overlap," a group of Berenberg analysts led by Alexander Haissl said in a note sent out to clients on Friday.

Nio and Tesla are appealing to customers in different regions, according to Haissl. He said Nio is currently a pure play on China's electric-vehicle market, benefiting from government support, market dynamics, and a material cost advantage versus imported vehicles. In China, Nio's ES8 vehicle — a seven-seat high-performance electric SUV— sells at a 60% discount to Tesla's seven-seat SUV Model X. 

Nio Tesla

berenberg

But for Tesla, China only accounts for about 15% of group sales, which means import duties only have limited overall impact. Moreover, Tesla is ramping up local manufacturing in China through its first overseas Gigafactory in Shanghai, which will improve its competitive position.

In terms of product, Haissl said that Tesla is materially ahead of the competition in Environmental Protection Agency range, an estimate of the number of miles an electric vehicle should be able to travel from a full charge. Tesla's Model X has an EPA range of 335 miles, while the Nio ES8's is at 154 miles.

And Nio's EPA range is miles behind the rest of the competition as well. Audi e-tron's EPA range is at 211 miles and Mercedes EQC's is at 196 miles.

"Tesla has already demonstrated its ability to outcompete incumbents and their internal combustion engine vehicles despite a higher purchase price, as consumers are willing to pay a premium for a better product and not just a different powertrain technology," Haissl said. 

"Newly launched EVs by traditional OEMs will come to the market at a around 80% purchase price premium  compared to their ICE counterparts without offering meaningful incremental benefits to the consumer. Consumers’ willingness to pay such a premium could turn out to be limited, which puts the competitive position of these EVs at risk," he added.

Nio — Chinese Premium EV manufacturer

Nio, backed by Chinese tech giant Tencent, is a four-year-old electric-car startup focusing on premium electric vehicles. It delivered 3,268 ES8s in the third quarter, exceeding its own target of 2,900 to 3,000 vehicles by 9%, and targets to launch its second vehicle, the five-seat ES6 premium SUV, in June or July of 2019.

Similarly to Tesla, Nio sells its vehicles directly without a franchised distribution network. Vehicle orders can be placed through a mobile app or at Nio Houses, a cross between a coworking space, a cafe, a daycare center, and an event space. 

Haissl added that despite Nio is not a Tesla "killer," it is a contender in the race to accelerate EV adoption. For example, Nio offers a battery-swapping service in contrast to competitors, and while Nio currently ooutsources its ES8 and ES6 manufacturing to auto manufacturer JAC, it is building its own manufacturing facility in Shanghai and in the process of acquiring its own EV manufacturing license.

Nio went public on the New York Stock Exchange in September. In its IPO filing, Nio said it made $6.95 million revenue in the first half of 2018, and that it had 6,201 unfilled ES8 reservations by the end of August, for which non-refundable deposits had been made but customers could still cancel their orders.

Earlier this month, a regulatory filing revealed that Baillie Gifford & Co, Tesla's largest investor after Elon Musk, owned 85.3 million NIO shares, or an 11% stake in the Chinese car maker.

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