Nio, a Chinese maker of premium EVs, is unlikely to take part in the race to the bottom triggered by Tesla’s decision to cut prices, a senior executive told Chinese media.
“Price reductions will spread in the EV industry, but not all players will follow suit,” Nio President Qin Lihong said on Monday. “For a premium brand, offering discounts to chase a rise in sales volume is not an ideal solution.”
That said, Nio still offers buyers discounts on certain models, including its ES8, ET7 and ES7 cars.
Prompted by a US government policy promoting EV sales, the California-based EV maker Tesla announced last December it would slash prices on its Model 3 sedan and the Model Y sport utility vehicle to stay competitive. The law in question, the Inflation Reduction Act, excluded new Tesla buyers from an equivalent credit because the company’s sales were so high.
Tesla made a similar decision in China, where its Shanghai Gigafactory has helped make it a major player in a white-hot EV market. The decision set off a wave of price cuts last month among its Chinese rivals, including Xpeng and Aito.
According to China Merchants Bank data, in the week after Tesla implemented the discount on January 9, its sales shot up by 76% compared to the previous week.
By comparison, Xpeng, Nio, and Li Auto, the country’s biggest domestic high-end EV makers, each reported a 50% drop in monthly sales in January 2023 from a year prior.
“Apparently, Tesla’s huge discounts siphoned off drivers’ buying interest in the Chinese-developed smart EVs,” Shanghai-based independent analyst Gao Shen told Chinese. “Overall demand for expensive EVs appears to be weak, which could lead to price wars in the premium EV segment this year.”
In 2020, the China Association of Automobile Manufacturers unveiled a plan to make all new vehicles sold in China “eco-friendly,” meaning they will be all-electric, hybrid electric-gasoline, or fuel cell-powered, by 2035. Beijing has subsidized EV makers since 2009 and to EV buyers the following year, although it ended the latter on January 1, 2023. However, a 10% tax reduction is still in effect until the end of the year.
The policies have had a dramatic effect: EVs are expected to make 35% of all car sales in China this year, and could exceed 60% of global EV sales.