Know NIO's Marketing Strategy, The Tesla of China
When you think of electric vehicles (EVs), what is the first brand that comes to mind? Tesla is the obvious choice. To be clear, Tesla does not spend any money on this marketing strategy. You did, however, consider Tesla. Why? Well, there is one more brand that is making waves in the EV market. That is NIO EV competing with Tesla face to face with elegancy, performance, and innovative marketing strategy. Let’s Talk about it! #TWN
When you think of electric vehicles (EVs), what is the first brand that comes to mind? Tesla is the obvious choice. To be clear, Tesla does not spend any money on this marketing strategy. You did, however, consider Tesla. Why? Well, there is one more brand that is making waves in the EV market.
NIO is a Chinese firm that designs and manufactures high-performance premium electric vehicles. William Li founded it in 2014, and it has received investment from companies such as Tencent and Baidu, propelling it to the top of China's domestic EV industry. The company's mission is to provide users with a sense of freedom and joy through its autonomous driving solutions and premium EVs.
We will talk about how this Chinese company is giving a tough time to its rivals in EV markets and how it handles its marketing strategies.
China's EV sales are expected to exceed 6 million units by 2025, and NIO could be a frontrunner in meeting this demand.
NIO’s Business Model in 7 Wonder Steps
It is difficult for a start-up like NIO to compete with the might of well-established OEMs (Original Equipment Manufacturers). Nio has been able to compete by emphasizing user experience and feedback in the development of product design and upgrades. Let's take a look at some of the other aspects of NIO's business model that have helped it become a game-changer. China's EV sales are expected to exceed 6 million units by 2025, and NIO could be a frontrunner in meeting this demand.
NIO focuses on innovation to stay ahead of the curve in the rapidly evolving EV market. In the last five years, it has filed around 300 patent applications. These include communication systems, safety features, lighting, HVAC systems, distribution, and electric power conversion.
It opens up the possibility of patent licensing for the brand, resulting in innovator status and revenue. NIO strives to offer technologically advanced premium EVs to the market, with three research centers in China and one each in the United States, Germany, and the United Kingdom.
NIO's NAD is autonomous driving technology. The NIO ET7 sedan is the brand's first autonomous driving model, launched in January 2021. To make autonomous driving safe, NAD combines NIO Aquila Super Sensing and NIO Adam Super Computing.
NIO Aquila is made up of 33 high-performance sensing units, including 8-MP high-resolution cameras, 1 ultralong-range high-resolution LiDAR, 5 mm-wave radars, 12 ultrasonic sensors, and 2 high-precision positioning units, all of which work together to generate 8GB of data per second. NIO Adam is a supercomputer that processes all of this data to generate high-clarity images and enhanced details for autonomous driving.
Baas (Battery as a Service)
The battery is the heart of an electric vehicle and typically accounts for at least one-third of the total cost of the vehicle. China issued a new regulation in April 2020 that explicitly exempts "battery swap model" vehicles from the policy's "300,000 RMB price threshold for receiving subsidies."
BaaS is a subscription-based or leasing service that aims to lower consumer costs. Customers who use this service can save up to 100,000 Yuan by not owning the battery.
Alternatively, they can lease the battery for around 1,280 Yuan per month for six years and then own it. It enables consumers to address the three-pronged problem of battery degradation, upgradeability, and lower resale values.
Consider how anxious you would be if your laptop battery died in the middle of a critical presentation and you had no way of charging it. Isn't it a terrifying experience? One of the most important factors influencing the purchase of an EV is the vehicle's range on a single charge.
Arranging for a spare laptop is still possible, but no one wants to be stranded in the middle of nowhere with their vehicle dead. Range anxiety is a real thing. To put this in context, 58 percent of Americans are concerned about running out of power before they can charge their vehicle.
NIO Power alleviates range anxiety by offering a variety of mobile internet-based power solutions to customers. One such option on the NIO app is "One Click for Power," which is a 24/7 on-call valet charging system. It offers a pick-up and drop-off service for recharging an NIO vehicle in the shortest amount of time possible based on the best option (Power Swap, Mobile, or Charger).
NIO Power offers services both at home and on the road. Power Home Plus chargers allow for fast charging of vehicles at home. Power Swap for on-road use includes battery swapping, Power Charger, and Power Mobile, which is similar to a portable power bank for a vehicle. The Power Mobile service delivers a charging van to the requested location, with a range of 100 kilometers after a 10-minute charge.
As of December 31, 2020, NIO had 792 Power Chargers spread across 53 cities in China, as well as 318 Power Mobile vans.
Technology can be difficult to grasp, and being the first to market does not guarantee success. Better Place, an Israeli start-up that filed for bankruptcy in May 2013, was the first to introduce battery swapping.
Tesla introduced the Model S with battery swapping capabilities in 2013, but the initiative was discontinued by 2015. The technology was revolutionary, but putting it into practice was anything but simple. NIO has solved the puzzle by developing a Power Grid.
As of December 31, 2020, NIO had 172 Power Swap stations in 74 cities across China, having completed 1.4 million battery swaps. Their Power/Battery Swap station 2.0, which was expected to be released in the second quarter of 2021, will reduce battery swapping time to under three minutes and accommodate up to 13 battery packs, which is significantly more than the current number of 5 battery packs.
- Customer experience is ranked as a critical factor in establishing brand loyalty by 73% of consumers.
- 84% of customers will be persuaded to buy a product if it is recommended by a known person, i.e., word-of-mouth marketing.
- 66% of users will increase their spending on brands to which they are loyal.
Are you wondering why I'm bombarding you with numbers? Is it forbidden for me to write about strategy? Just one more statistic, I assure you.
According to 86 percent of Fortune 500 companies, brand communities provide insights into customer preferences.
NIO House is an offline channel that fosters an NIO user community. It serves as a showroom as well as a clubhouse for NIO users, their families, and friends. The NIO House is divided into seven sections: a café, a library, and a living room, each of which caters to different consumer preferences. As a result, NIO's business model is centered on building a brand community that is responsible for customer experience, word-of-mouth marketing, and brand loyalty.
A brand community is a high-yielding business strategy. Consider Harley-Davidson or Royal Enfield, or IKEA and its famous meatballs. NIO House, as well as NIO Spaces, which are similar to traditional showrooms, contribute to the sense of community. NIO Day is an annual celebration of the NIO community that includes product launches and user interaction with the brand.
NIO's business model entails more than just selling electric vehicles and related services. As previously stated, NIO is establishing a community.
NIO Life is a lifestyle brand that offers products in a variety of categories such as apparel, home and living, travel, and bags. So, what makes it unique, you ask? NIO has worked with over 100 designers from around the world to reuse and restyle vehicle scrap into lifestyle and fashion products under the NIO Life label. Since 2016, over 2.6 million NIO Life items have been sold through online and offline channels.
NIO is not a mass producer, nor is it a sales-driven company. It may appear absurd given the auto industry's high capital intensity.
NIO's business model is more than just premium EVs. It is a hybrid of EVs and charging solutions (NIO Power), subscription services (BaaS), NIO Life, NIO Spaces, and NIO House.
NIO focuses on a long-term strategy to drive sales by creating an ecosystem by providing premium and personalized services. It considers a customer's lifetime value rather than a one-time purchase. Alphabet, Microsoft, Apple, and Amazon are all supporters of the ecosystem strategy.
After all, was said and done, NIO derived 93% of its revenue from Vehicle Sales in Q4 FY2020. 'Other Sales' increased by a whopping 184.1% to $71.6 million in Q4 FY2020, accounting for the remaining 7% of revenues. Despite this, NIO lost $812.9 million in 2020, though this was 53% less than the previous year.
NIO was on the verge of bankruptcy at the end of 2019 but has since staged a remarkable turnaround, thanks in large part to the Hefei government's investment.
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Even if it only tends to dominate the Chinese market, the brand has significant growth potential, and it has its sights set on the global market. The Chinese government's strong support, a significant market value of $74 billion (more than Ford Motor Co.) as of July 2021, raising awareness of EVs, and a customer-centric strategy are just a few of the powerful propellants driving this growth.
NIO, with its seven wonders business model, appears poised to navigate the rocky terrain of the automotive industry's rising costs to become a dominant force in the world of EVs.