NIO’S EUROPEAN ROAD-TRIP WILL EARN BRAGGING RIGHTS

BY KATRINA HAMLIN

Chinese electric-car maker Nio will burnish its brand with an expedition to Europe. William Li’s roughly $60 billion marque can deploy extravagant marketing and services to win foreign fans. Though it may take years to snag significant share, in 2022 even modest overseas sales will lift its stock.

Li first outlined his plans for foreign conquest in March. Six months later, he’d set up shop in Norway, where battery-powered cars already outsell traditional gas guzzlers. Li wants to move into tougher terrain, entering a further five European countries in the year ahead.

The grand tour won’t come cheap. Nio is following a roadmap devised for China, where it built its brand from scratch. That means opening flashy “Nio Houses” – exclusive, conspicuous clubs-cum-showrooms at prestigious addresses. Renting such premises in cities like Berlin could cost as much as 2 million euros a year, estate agents estimate. Fiddly after-sales services like on-demand battery delivery will also jack up costs.

But cracking Europe is critical for Nio and rivals like Xpeng and WM Motor. In 2020, when consumers spent $120 billion on electric cars, according to the International Energy Agency, the region accounted for almost half of vehicles sold. Meanwhile, the domestic market is becoming increasingly crowded as hundreds of local startups vie with titans such as Volkswagen and Tesla eyeing a piece of the People’s Republic. In response, larger Chinese brands are driving in the opposite direction. Long term, Nio reckons half its sales will come from outside China.

But cracking Europe is critical for Nio and rivals like Xpeng and WM Motor. In 2020, when consumers spent $120 billion on electric cars, according to the International Energy Agency, the region accounted for almost half of vehicles sold. Meanwhile, the domestic market is becoming increasingly crowded as hundreds of local startups vie with titans such as Volkswagen and Tesla eyeing a piece of the People’s Republic. In response, larger Chinese brands are driving in the opposite direction. Long term, Nio reckons half its sales will come from outside China.

Tesla’s early days in China provide an interesting lesson. In 2015, a year after arriving, it reported $300 million of Chinese revenue. Though that was barely 8% of Tesla’s top line, it laid the foundations for Musk’s marque to become the world bestseller. Nio can sell 11,000 units in Europe to achieve a similar outcome from its first foreign forays, assuming the top line is similar to Refinitiv’s forecasts for 2022. Such early success would put Nio far ahead of most rival Chinese companies, too.

Hype around Nio’s domestic prospects has already boosted its valuation tenfold in the three years since its $7 billion New York listing. Even a modest overseas road trip will push the shares into overdrive.

First published January 2022