NIO CEO downplays pressure from Tesla’s price cuts in China

Plug-in vehicles are all the rage in China, partly propped up by government subsidies.

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NIO CEO downplays pressure from Tesla’s price cuts in China

Chinese electric vehicle maker NIO’s founder and CEO William Li said that his company will not resort to lower prices, but instead rely on better service to remain competitive.

Li made the remarks during the company’s latest earnings call when answering a question about whether NIO’s medium and long-term pricing strategy will be affected by dwindling subsidies for the EV sector and by Tesla’s localization of its most popular vehicle, the Model 3, in China.

He also commented that its rivals’ moves to slash prices hurt their own brands and damage customer loyalty.

Louis T. Hsieh, chief financial officer of NIO, added in the conference call that his company’s vehicles are still competitively priced when compared to Tesla’s.

The car in Tesla’s product lineup with the lowest price is the Model 3, which has a base price of RMB 407,000 (US$61,000), while NIO’s ES6 starts at RMB 358,000 (US$53,000).

Car buyers in China could pay even less. In 2018, state subsidies for new energy vehicles reached up to RMB 50,000 (US$7,400), with local subsidies reaching half that amount. In the case of NIO’s ES6, buyers could knock off another RMB 100,000 (US$15,000) from the sticker price by foregoing the car battery, but fees for renting a car battery—RMB 1,280 (US$190) per month for six years—add up to nearly that amount.

NIO is shielded from the Chinese government’s diminishing subsidies as the company serves high-end consumers, Li told analysts.

The Nasdaq-listed EV maker’s stock price dived 17.81% from US$10.16 to US$8.35 in after-hours trading after the company disclosed that it recorded a net loss of RMB 3.5 billion (US$511.5 million) attributable to NIO’s ordinary shareholders in the fourth quarter of 2018.