Chinese carmaker Nio warns energy crisis slowing European expansion
Founder of electric vehicle maker says rollout of battery swapping stations is proving slower than expected
The head of Chinese electric carmaker Nio has warned that Europe’s energy crisis is slowing its expansion in a region where it is aiming to take on dominant players such as Mercedes-Benz and BMW.
William Li, the group’s founder and chief executive, said that soaring energy costs are one impediment to the company’s rollout of battery swapping stations across Europe.
In contrast to rival carmakers that rely on recharging their batteries, Nio uses a system of swap stations in which batteries are removed and replaced with new ones in a process that takes just minutes.
“Right now we are behind the schedule regarding the swap station installation, but that is driven by multiple reasons and the electricity cost is one part,” Li said in an interview. Slower-than-expected planning approvals and the need to train workers were also hindering the rollout, he added.
The company began selling its electric cars in Norway last year, its first outside China, but only has two swap stations operating in the country, short of a forecast at the start of the year that it would have five.
We didn’t really manage our expectation for the European market, and the actual speed is actually behind our expectation
William Li, Nio founder and chief executive
Nio, regarded as one of China’s leading challengers to Tesla, is betting its domestic success will prove a springboard to crack Europe and the US. The group, whose shares are listed on Wall Street, has ambitions to have 1,000 charging stations outside of China by 2025, with the majority in Europe.
Li, who founded Nio in 2014, also said that rising battery costs, driven by increases in the price of raw materials, would also delay the group’s target of becoming profitable in the short term. The group posted a second-quarter net loss of $411mn.
“Profitability is still our target, but what matters most is finding the right cadence for us to become profitable,” he said, pointing to the cost of growing its Chinese business while funding an aggressive international expansion.
Nio already has about 800 stations in China’s biggest cities, a total it expects to reach 4,000 by 2025.
“We have been pretty fast and efficient in China,” at rolling out the battery swapping stations, said Li. “Then we didn’t really manage our expectation for the European market, and the actual speed is actually behind our expectation.”
The company is banking on the same model working in Europe, despite lower population density requiring it to install more stations.
Given that a battery can account for a third of the price of an electric car, Nio reckons that its model of selling drivers the car and giving them the choice of leasing the battery will give it a larger market than rivals.
In Norway, where it began selling cars last September, some 95 per cent of its customers lease batteries rather than buy them with the car.
A further hurdle for its European rollout is the need to install transformers, which are essential to running the stations and can take up to two years to build. Li also pointed to the difficulty in securing planning permission for the stations.
“It will also take more effort than time for us to really communicate with all these authorities and offices to get the permit for approval from them,” Li said.
The carmaker, which went public in New York in 2018, would consider establishing a manufacturing plant in Europe if its sales in the region hit 200,000 sales in the region. The group has sold about 240,000 cars globally, with just a handful of those outside China.
Li, a serial entrepreneur, dismissed concerns that consumers in the US and Europe may be wary of buying Chinese cars given the strained political relations. US consumers, he pointed out, continued to purchase Japanese cars even when the two countries had a trade war during the 1980s.