Chinese EV maker Nio signals it will not join an industry price war, as market reacts to Tesla’s discounts amid rising competition

Nio president says ‘offering discounts to chase a rise in sales volume is not an ideal solution’ for premium EV brands
Qin Lihong says an accelerated pace of electrification on mainland roads still bodes well for premium EV producers this year

Electric & new energy vehicles

Daniel Renin Shanghai

Published: 10:15pm, 6 Feb 2023

Why you can trust SCMP

A senior Nio executive has said China’s cutthroat premium electric vehicle (EV) market will not necessarily lead to an all-out price war as more petrol cars are replaced by battery-powered counterparts.

Qin Lihong, president of the Shanghai-based carmaker, told reporters on Monday that it was not advisable for premium EV brands to offer huge discounts to bolster sales, in an indirect reference to recent big price cuts by US EV maker Tesla.

“Price reductions will spread in the EV industry, but not all players will follow suit,” he said. “For a premium brand, offering discounts to chase a rise in sales volume is not an ideal solution.”

Qin said that an accelerated pace of electrification on mainland roads still bodes well for premium EV producers this year, albeit with stronger competition.

China’s premium EV makers report steep sales plunge after Tesla’s discounts

“Overall, 2023 will be a stern test for EV makers, but we believe growth opportunities remain huge as the EV adoption rate continues to rise,” said Nio’s president.

In 2022, about one in every four new vehicles sold on the mainland, or 6.5 million units, were powered by batteries, up 96 per cent year-on-year.

The China Passenger Car Association forecast that EV sales growth would slow to 26 per cent in 2023.

Nio, along with Beijing-based Li Auto and Guangzhou-headquartered Xpeng, are viewed as China’s best response to Tesla as the trio assembles smart electric cars featuring autonomous driving technology, sophisticated in-car entertainment systems and high-performance batteries.

Qin Lihong, president of Chinese smart electric vehicle (EV) start-up Nio. Photo: Handout

Dwindling demand for expensive EVs since late 2022 amid job uncertainty for consumers and wage cuts, prompted Tesla to slash prices in China of its Shanghai-made Model 3 and Model Y vehicles twice in three months.

Tesla’s Gigafactory in Shanghai has marked down its prices twice since late October, driving prices of Model 3s and Model Ys to their lowest levels since its first vehicle rolled off the wholly foreign-owned factory in December 2019.

On October 24, Tesla offered discounts of up to 9.4 per cent on the Model 3 and Model Y vehicles, before slashing prices by as much as 13.5 per cent on January 6.

Tesla’s price cuts could revive sales growth as rivals hold back on discounts

Xpeng and Aito, an EV brand backed by telecommunications equipment giant Huawei Technologies Co, have both followed this up with price cuts of their own. On January 17, Xpeng offered discounts of up to 13 per cent on some of its models to make its cars more accessible for Chinese drivers.

Li Auto and Nio, by contrast, have kept prices of their vehicles steady. However, Nio is offering customers a 5,000 yuan (US$736.70) discount if they purchase an ES8, ET7 and ES7 car. Based on current vehicle prices, this incentive represents a discount of roughly one per cent.

The basic edition ES8 sports EV has a price tag of 496,000 yuan.

“Price cuts are a double-edged sword,” said Gao Shen, an independent autos analyst in Shanghai. “Unprofitable EV brands like Nio will see losses widen if they offer heavy discounts to customers.”