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NIO: Environment and Competitors Analysis

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NIO: Environment and Competitors Analysis

The Investigated Company Information

NIO is a Shanghai-based Chinese car manufacturer specializing in the design and development of electric vehicles. The company also competes in the FIA Formula E Championship, the first series of single-seater races with an all-electric drive. The brand unites more than 2,000 specialists in the field of design, high technology, and management in 13 countries of the world. At the moment, the number of employees of the company has exceeded 6 thousand (Kumar, 2018). The headquarters of the company is located in Shanghai, China, and representative offices are open in the USA, Germany, England, and Hong Kong.

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The name NIO is a trademark developed for the American and European markets, the original Chinese brand name is Weilai, which literally means “blue sky.” The history of the brand began in 2014, when the chairman of the board of the existing company NextEV, William Lee, founded a new company NIO, in which well-known investment funds immediately began to invest. The company’s first car debuted on the day the new brand was founded, and was named NIO EP9 (Kumar, 2018). The firm’s investors are a pool of large corporations, including Tencent, Baidu, GIC, TPG, Sequoia Capital, Hillhouse Capital.

The company takes part in the Formula E championship, which serves as a testing ground for the organization’s vehicles and technology. In the future, the brand plans to expand its lineup in the segment of premium cars and electric supercars. It is already known about several existing prototypes, which will soon be presented to the general public. NIO has launched a battery rental service that will allow drivers to buy electric vehicles without a battery. The business model, called battery as a service (BaaS), requires drivers to pay a monthly rent to use the batteries (Kumar, 2018). Leasing will significantly reduce the total cost of all NIO vehicles, while battery rental will cost around $150 per month (Jin & He, 2019). Since the battery is one of the most expensive components of EVs, this has helped drive down starting prices for NIO EVs.

The company has set up a working network of NIO Power services to replace batteries instead of charging. Simply put, NIO equated the process of charging an electric car with refueling a vehicle on gasoline. It means that customers no longer have to wait 40-50 minutes to charge the battery to 100%, but can leave in 5-7 minutes with an updated battery (Jin & He, 2019). To date, the company has deployed 143 battery replacement stations in 64 cities in China and performed over 800,000 battery replacements. In 2020, NIO plans to build over 1,100 charging stations in China and equip over 1,200 Power Mobile service vehicles (Deloitte, 2020). Thus, the company implements systemic and consistent strategy, building infrastructure for its products usage.

Competitors’ Background and Activity. Business Environment

Many are ready to fight for the title of “Tesla’s main competitor in China” – for example, Xpeng or Faraday Future. Tesla shares rose significantly at the end of 2019 – after the publication of the company’s quarterly reports, in which profit was recorded at a higher than expected level (Jin & He, 2019). The company planned to start producing cars for the Chinese market in 2020, but the construction of the plant and adjustment of production processes were ahead of schedule. Now the plant produces 1000 cars a week, and Tesla expects to double production within a year (Deloitte, 2020). The electric vehicle market in China is ahead of that of other countries. According to Bloomberg New Energy Finance, China accounted for 60% of the 1.3 million electric vehicles sold worldwide in 2018 (Li et al., 2018). Residents of Chinese megalopolises have become the main buyers of electric cars. Five years ago, miniature, low-speed electric vehicles were dominant in China; by selling, they were 15 times ahead of more conventional passenger EVs. However, the latest statistics prove that the situation has changed dramatically. Over the past year, 1.1 million standard electric cars and 1.4 million micromobiles were sold in the country (Deloitte, 2020). In less than a decade, China’s new electric vehicle market has become the largest in the world.

So far, this policy of supporting the industry is bringing positive results. The number of Chinese electric vehicle manufacturers has tripled over the past three years, with more than 400 new brands registered across the country (Jin & He, 2019). While the vast majority of startups will not survive in the conditions triggered by the SARS-CoV-2 coronavirus, the most competitive companies will remain and will grow stronger as the electric vehicles industry develops in all directions. The scale is such that individual Chinese cities are ahead of many Western countries. For example, Shenzhen and Shanghai are second only to the United States and China. Municipal benefits are often a decisive factor in shaping markets. In Beijing, it is more profitable to buy electric vehicles, while in Shanghai there are incentives for rechargeable hybrids, and there are more of them sold there. Thus, the competition can be characterized as rather harsh in the considered market.

BAIC Group (Beijing Automotive Industry Holding Co. or Beijing Automotive Group Co.) is a Chinese state-owned holding company that unites several automotive and engineering enterprises. Founded in 1958, headquartered in Beijing, the total number of employees is over 130 thousand people (Kumar, 2018). BJEV is an unknown manufacturer outside the country, but in China, the company produces the largest number of electric vehicles and is the second largest car producer after Tesla. Such popularity of the company was associated with state support and the allocation of subsidies for the purchase of cars. Now consumer subsidies for cheap electric cars are being cut, which means that the electric car market is open to Western manufacturers.

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The Chinese firm Xpeng is a relatively new startup that has developed a car that closely resembles the American Tesla electric car. Xpeng offers two models of electric vehicles – the G3 SUV and the P7 sedan. The company said in its IPO prospectus that it plans to begin production of another sedan in 2021 (Deloitte, 2020). Xpeng’s key shareholders include Simplicity Holding Ltd. and Taobao China Holding Ltd. Henry Xia, who founded Xpeng in 2014, has previously openly admitted that he was influenced by Tesla and its patent filing. However, the Chinese company’s engineers have gone a little further than just leveraging the technology of the most famous electric vehicle manufacturer.

The Chinese company BYD is the third largest electric vehicle manufacturer in the world. Originally, BYD Company Ltd made batteries for mobile phones. It was only in 2003 that the history of BYD’s automotive production began when it bought a Chinese automobile company from Sichuan province. Today, 40 thousand people work at BYD factories. In 2004, a research and development center was established (Deloitte, 2020). The company is doing well. Apparently, the name of the concern plays an important role in this. BYD is an acronym that can be translated as “build your dream.” The main products of the company are cars with a hybrid engine and minicars. The extensive research base accumulated by BYD over the years of battery production and development is of great help to the company today. According to the JATO agency, last year it sold 95 thousand electric vehicles, although almost all of them were sold in the Middle Kingdom itself (Deloitte, 2020). The company is developing at a slow but steady pace.

China was late in producing gasoline-powered cars, leaving the country behind the United States, Japan, and Germany. However, now the government is hoping that electric vehicles will help bridge that gap, pushing China to the top spot in the global automotive supply chain. China has created incentives for automakers to build electric vehicles, and NIO used the situation. Now it has been listed on US exchanges for two years and is a competitor to Tesla, with the best prospects to date.

References

Deloitte. (2020). New market. New entrants. New challenges. Battery electric vehicles [PDF file]. Web.

Jin, L., & He, H. (2019). Comparison of the electric car market in China and the United States. International Council on Clean Transportation Working Paper. Web.

Kumar, K. (2018). Chinese electric car market vs Tesla. Curiosity Publishers.

Li, W., Yang, M., & Sandu, S. (2018). Electric vehicles in China: A review of current policies. Energy & Environment, 29(8), 1-13. Web.

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Zajac, J. M. (2020). Case study of Tesla in China. Conference Logistic Conference at Gdańsk University. Proceedings of Logistic Conference at Gdańsk University, Sopot.

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