Tesla Killer? Definitely not now, and outlook not so good.
What seems to be working:
- There is 1 production ready model (ES8) that is almost 50% cheaper than Tesla’s Model X. That’s promising.
- The car is cool. On paper, it is cool.
- They have a lot of investors and money. They can definitely raise money.
- They are burning cash like crazy: $7 million in sales, lost $502.6 million in the period. But wait, Amazon burned cash. Tesla burned cash . That might not a big issue. In fact, some argue that could be the true modern business model.
- They have an extremely aggressive retail strategy. Their shop in Shanghai is at one of the most prime locations in the city. It’s the same mall where the Starbucks Roastery is, and of course where Tesla is at too.
- Their shops do nothing but to show. They also show off their home battery solutions. It’s probably a good strategy because they seem to understand the importance of perception via presence and connection with customers in person.
What are the concerns:
- They produced 481 cars in July, 2018. Tesla produced ~17,000 cars in a month in Q2 2018.
- What I have learned from observing Tesla’s disastrous ramp in production, is that production of EV seems ridiculously hard.
- We should reference other more established/skilled car companies, like BMW and try to understand this.
- BMW claimed they would be producing 6,000 EVs (i3) a month in this fall. This was after a 300million EUROS investment, and the i3 has been in the market since 2014. That means they have had 4 years of figuring things out.
- I tried to look for real owners’ reactions online (tudou, baidu, wechat), and found surprisingly little. What I have found were confusingly and almost misleading branded content, extremely hostile fans, and nothing else yet.
To summarize, some facts and assumptions:
- Let’s assume that China ramps like no other countries (likely true).
- The challenge: 500 to 5000 per month.
- It took BMW 4 years.
- nio has 17,000 outstanding orders.
Therefore, it’s no killer right now. Until we see they ramp to 5,000 units per month, they are demonstrating reasonable economics, and customers are loving the products (BMW and Tesla are succeeding triumphantly in this area), then let’s gingerly remove its hypebeast bumper sticker, and proclaim it a … rival.