Chinese electric car company Nio will enter the UAE Middle East this year

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Chinese electric car company Nio launched its lower-priced brand Onvo on Wednesday, May 15, 2024 in Shanghai, China.

CNBC | Evelyn Cheng

BEIJING – Chinese electric car company Nio plans to expand into the Middle East this year, CEO William Li said on an earnings call Thursday, at a time when rivals have been expanding their global footprint.

The nearly decade-old company will also start shipping its cheapest brand, Firefly, in the first half of next year, Li said.

Nio, which recently received funding from Middle Eastern investors, saw record high deliveries of 20,544 vehicles in May.

The U.S.-listed Chinese company, which has been operating at a loss, plans to offer its products and services in the United Arab Emirates by the end of this year, Li said, according to a FactSet transcript.

Nio sells mainly in China and parts of Europe, with a focus on the higher-end market. Li said the brand can break even if monthly sales reach about 30,000 vehicles.

Rival BYD has also made the United Arab Emirates the gateway to the Middle East. The battery and electric car giant said in November it was opening a showroom in Dubai Festival City as part of a project collaboration with Al FuttaimElectric mobility company.

Nio unveils affordable electric car

As competition heats up in China’s electric car market, Nio launched a cheaper brand called Onvo in May. The Onvo L60 SUV, which will be delivered in September, starts at 219,900 yuan ($30,349) versus Tesla Model Y costs 249,900 yuan.

Li said on Thursday that the price of the L60 was only for the pre-sale, and not the final price.

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“We continue to believe that the Onvo L60 will be the key factor impacting NIO’s potential prospects in the second half of 24,” Nomura analysts said in a note on Friday. They rate the share neutral.

Nio’s third car brand

An even cheaper brand, Firefly, is also in the works, Nio’s Li said.

He told investors Thursday that Firefly will deliver its first car in the first half of next year, priced between 100,000 and 200,000 yuan.

Firefly will share the same retail outlet as Nio-branded cars, Li said, noting it would be similar to the retail model used by MINI and BMW.

Part of BYD’s strategy was to market vehicles and sub-brands for different market segments. EV startup Xpeng also plans to launch a lower-priced brand, Mona, this month and begin mass deliveries in the third quarter.

Nio said research and development costs in the first quarter amounted to 2.86 billion yuan, down 6.9% from the same period a year ago.

First-quarter operating loss was 5.5% higher than a year earlier at 5.39 billion yuan.

Expansion of the Onvo store

Onvo, which has a separate sales channel from Nio, plans to open about 100 stores in China, Li said. Adding each location would require an investment of about 1 to 2 million yuan.

“We also understand that competition in the ONVO segment is fiercer than NIO,” Li said. “In that case, we will also find a balance between volume and margin. We will not increase sales volume at the expense of our vehicle margin.”

Onvo is expected to break even with about 20,000 to 30,000 car sales per month, he said.

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The company also plans to spend about 200,000 to 300,000 yuan for each of its older battery swapping stations to make them compatible with Onvo cars, Li said.

Nio’s energy subsidiary is expected to receive up to 1.5 billion yuan in new investments from a fund backed by the Chinese city of Wuhan, the company said in late May.

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