(May 16): Nio Inc is launching a more affordable electric car brand in China in a bid to gain a firmer foothold in the world’s most competitive market as Tesla Inc’s momentum slips. 

The brand, dubbed Onvo, will target family users with its first model, which competes directly with Tesla’s Model Y and Toyota Corp’s RAV4 sport utility vehicles (SUVs), Nio chief executive officer William Li said at an event in Shanghai on Wednesday. The launch vehicle — the medium-sized L60 SUV — is “longer, wider, and roomier than the Model Y,” he said.   

The L60, which will be delivered to customers as soon as September, will start at 219,900 yuan (RM143,442). Tesla’s Model Y starts at 249,900 yuan in China, and the most basic Nio-branded vehicle starts at 298,000 yuan.

The Shanghai-based company, which posted an annual loss of 20.7 billion yuan last year and failed to meet its sales target, is looking to pick up market share and profitability by expanding its product lineup while improving efficiency. While Onvo will stand apart from Nio’s eponymous brand, which is positioned as a premium vehicle maker, it will share much of the same infrastructure. This includes the charging network and sales and service hubs, in addition to Nio’s supply chain and research and development. 

Onvo “has been further enabled by Nio’s capabilities and resources accumulated in the past 10 years,” Li said, adding that the new brand will allow the company to reach more customers. 

Nio deliveries fell in the first three months of 2024 amid heightened competition and price cuts by rivals including BYD Co and Li Auto Inc. Tesla, which has rolled out several rounds of price cuts in China, was also a victim. While sales of new-energy passenger vehicles rose 28% in April from a year earlier — a category that includes EVs and plug-in hybrids — Tesla’s deliveries fell 18%. 

Targeting mass-market users, Onvo won’t grant its owners access to Nio Houses — the exclusive lounge-like spaces where Nio owners can get free drinks and take social classes, Li said in a media briefing on Thursday. The cars will come with a cheaper battery pack, reducing monthly leasing fees. 

The brand will also focus on “core needs,” rather than use more expensive technologies like lidar-based advanced driving systems and high-performance motors to increase acceleration, said Alan Ai, senior vice president of Nio and the president of Onvo. 

The unit is expected to start contributing to Nio’s profitability when monthly sales reach about 20,000 vehicles, Li said. Onvo expects to launch one new model per year, with its second car targeting larger families.

Meanwhile, Li said US President Joe Biden’s move this week to impose import tariffs of more than 100% on Chinese EVs is “unreasonable”. The imposts “purely serve political purposes and go against the freedom of trade,” he added. 

Global automakers who have lost market share in China have “no other reasons but a lack of competitiveness in product and technology,” he said. “Some people point fingers at China saying we have overcapacity in the automotive industry, but the overcapacity is in fact with foreign brands.”