Chinese electric car company Nio launched its lower-cost brand Onvo on Wednesday, May 15, 2024, in Shanghai, China.
CNBC | Evelyn Cheng
BEIJING — Chinese electric car company Nio plans to expand to the Middle East this year, CEO William Li said on an earnings call Thursday, at a time when rivals have been increasing their global footprint.
The nearly 10-year-old company will also start shipping its lowest-cost brand, Firefly, in the first half of next year, Li said.
Nio, which recently received funding from Middle East-based investors, saw record-high deliveries of 20,544 vehicles in May.
The U.S.-listed Chinese company, which has been operating at a loss, plans to start offering its products and services in the United Arab Emirates by the end of this year, Li said, according to a FactSet transcript.
Nio primarily sells in China and in parts of Europe, with a focus on the higher-end market. Li said the brand can break even if monthly sales reach around 30,000 vehicles.
Rival BYD has also made the United Arab Emirates its entry point to the Middle East. The battery and electric car giant said in November it opened a showroom in Dubai Festival City as part of a collaboration with Al-Futtaim Electric Mobility Company.
As competition in the Chinese electric car market intensifies, Nio launched a lower-priced brand called Onvo in May. The Onvo L60 SUV, which is set to begin deliveries in September, starts at 219,900 yuan ($30,349) versus Tesla Model Y’s 249,900 yuan.
Li said Thursday the L60’s price was only for pre-sales, not the final price.
“We continue to believe that the Onvo L60 will be the key factor influencing NIO’s potential outlook in 2H24,” Nomura analysts said in a note Friday. They rate the stock neutral.
Nio’s third car brand
An even lower-priced brand, Firefly, is also in the works, Nio’s Li said.
He told investors Thursday that Firefly will deliver its first car in the first half of next year, priced between 100,000 yuan and 200,000 yuan.
Firefly will share the same point of sales as Nio-branded cars, Li said, noting it would be similar to the sales model used by MINI and BMW.
Part of BYD’s strategy has been to release vehicles and sub-brands for different market segments. EV startup Xpeng also plans to release a lower-priced brand, Mona, this month and begin mass deliveries in the third quarter.
Nio said its research and development expenses in the first quarter were 2.86 billion yuan, down 6.9% from the year-ago period.
Loss from operations during the first quarter was 5.5% higher from a year earlier at 5.39 billion yuan.
Onvo store expansion
Onvo, which has a separate sales channel from Nio, plans to open around 100 stores in China, Li said, adding each location would require an investment of about 1 million yuan to 2 million yuan.
“We also understand that the competition in ONVO’s segment is more intense than NIO,” Li said. “In that case, we will also strike a balance between the volume and the margin. We will not boost the sales volume at a cost of our vehicle margin.”
Onvo is expected to break even with about 20,000 to 30,000 vehicle sales a month, he said.
The company also plans to spend about 200,000 yuan to 300,000 yuan for each of its older battery swap stations to make them compatible with Onvo cars, Li said.
Nio’s power subsidiary is set to receive up to 1.5 billion yuan in fresh investment from a fund backed by the Chinese city of Wuhan, the company said in late May.