Tesla boss Elon Musk isn’t known to admire his competition, but when Chinese automaker Nio made its 100,000th electric car last week, he offered his congratulations.
It was a mark of respect from a CEO who had been through “manufacturing hell” with his own company. Yet it is also a sign of the growing influence of Chinese electric car makers. They hope to carve out a niche among the heavyweights of the new industry and bring a significant new challenge to Tesla – and the rest of the auto industry as it struggles to catch up.
Tesla’s mania and cheap money have pushed the market valuations of a handful of electric car makers to astonishing levels. Tesla’s value topped $ 830 billion (£ 600 billion) in January (it’s now down to around $ 700 billion – still almost three times the size of its closest rival, Japanese automaker Toyota) .
Chinese rivals Nio, Xpeng, and Li Auto all quickly rose in value to compete with much larger, more established manufacturers – though they never made an annual profit – thanks to U.S. stock quotes that allowed the ‘access to retail investors, although their values have fallen sharply from highs earlier this year.
Their fundraising successes allowed them to invest money to compete with Tesla in China. Now they are eyeing the European electric car market – the largest in the world.
This would put more pressure on traditional automakers such as Volkswagen, which are trying to rapidly expand production of electric cars. High-end automakers, including the Jaguar Land Rover in the UK or the German BMW, could also lose out if Chinese brands accept some of their wealthy customers. Jaguar has pledged to go all-electric by 2025 and BMW said last month that half of its European sales will be electric by 2030.
The Chinese government has spotted the opportunity to dominate a new sector by giving big subsidies to its electric car industry. According to Philippe Houchois, an automotive analyst at US investment bank Jefferies, the resulting crop of Chinese automakers follows Tesla’s playbook and is not hampered by the costs of shutting down internal combustion engine factories.
Li Auto, Nio and Xpeng could become some of Tesla’s biggest rivals – Reuters reported last month that all three were considering listings in Hong Kong. Another Chinese startup, Faraday Future, said in January it would list in the United States through a merger with a special purpose acquisition company (Spac), raising $ 1 billion.
“If you’re Tesla, all of a sudden they’re competing in the field, but they’re also competing for access to capital,” Houchois says.
Some of Tesla’s rivals have comparable technology and equally ambitious brands. Hui Zhang, executive vice president of Nio for Europe, told the Observer the luxury automaker aims to combine elements of Tesla and Apple, the world’s most successful consumer tech company.
Nio, known as Weilai in its home market, aims to start selling vehicles in Europe later this year. Its factory can currently produce around 120,000 cars a year, significantly less than the nearly 500,000 Tesla made in 2020. Nio avoided bankruptcy in early 2020 when the city of Hefei bailed it out, but it raised more than $ 4.5 billion in stocks and bonds. offers in recent months, against a backdrop of strong investor demand.
Tesla will have an advantage in Europe when it opens a plant in Berlin this summer, but Chinese automakers also have the capital to open production in Europe. Matthias Schmidt, a Berlin-based auto analyst, says Chinese manufacturers will have an opportunity as European giants profit from their gasoline and diesel models, as well as hybrids.
“Chinese manufacturers hoping to introduce battery-electric vehicles,” says Schmidt, “have a four-year window to gain traction in a market that plays to some extent with a line of electrified products from Team B , with a limited offer until the end. of the first half of the decade. ”
Chinese companies are already heavily involved in the electric car boom through the manufacture of lithium-ion batteries. Contemporary Chinese tech Amperex – better known as CATL – is a supplier to Tesla, has a factory in Germany, and said last year it had developed a battery capable of surviving a million miles of driving and charging.
BYD is another battery maker that also produces electric cars, backed since 2008 by US investment billionaire Warren Buffett. Shares of the Shenzhen-listed company have more than tripled since the start of 2020 – even after falling to record levels in early February. It capitalized on investor interest in January, selling shares worth $ 3.9 billion.
Rivals with deep pockets can spend a lot on technology, which adds to the pressure on Tesla. Nio’s main selling point is that its batteries can be replaced by robots in minutes, eliminating the threat of range anxiety for EV drivers. Xpeng, valued at $ 24 billion, has invested heavily in autonomous driving software, and could therefore compete with Tesla through lucrative sales of subscription-based autonomous driving capabilities. Its P7 sports sedan could target potential buyers of Tesla’s Model 3 and S models in Europe, rather than the more affluent customers courted by Nio.
Xpeng, chaired by tech entrepreneur He Xiaopeng, has already launched its G3 SUV in Norway – which, thanks to government subsidies, last year became the first country to see sales of electric cars surpass those of combustion engines. internal. Xpeng now decides which European markets to target next, said its vice president, Brian Gu. Automotive news in January.
Analysts have repeatedly warned that Tesla’s declining electric car industry is in the middle of a bubble. Yet even as valuations fall further after recent sharp declines, policymakers have already benefited from cheap financing that will allow them to fight for a significant share of the market.
“Underneath what’s going on with stock prices is a belief in the electric vehicle industry,” said Zhang de Nio. “It’s a belief in the business model that a company like Nio or Tesla is trying to hit.”
How they compare
Guangzhou-based Xpeng plans to launch its P7 premium sedan in Europe, with downloadable updates to the autonomous driving software.
Price 229,900 yuan in China (£ 25,600) Vary 439 miles (by relatively mild NEDC standard)
A very large battery gives Nio’s sedan long range and quick acceleration – 3.9 seconds to 62 mph – as it compares to Tesla’s Model S.
Price 448 000 yuans (50 000 £) Vary 1001 kilometers (NEDC)
WORLD Tang EV600
Formerly a plug-in hybrid, the battery-powered version of the Tang SUV will go on sale in Norway this year.
Price 260 000 yuans (28 900 £); Vary 603 kilometers (NEDC)
Tesla model Y
Musk’s seven-seater SUV will be the first to roll off the production line in Berlin. The performance version can handle 0 to 60 mph in 3.5 seconds.
Price 34 000 $ (24 600 £) Vary 303 miles (according to the stricter WLTP standard)