Nio is winning EV drivers' hearts as competition in China spikes

THE fierce brand loyalty inspired by Chinese electric carmakers is something to behold, and a big reason behind the huge success many have had with local buyers.

Nio is a poster child for this and a look into how the location was chosen for its 2022 annual customer day, to be held later this year, is quite telling. The upstart electric vehicle maker eventually landed on Hefei in China's eastern Anhui province, but only after loyal customers all around the nation competed for their respective cities to be nominated. Promotion posters were designed, local authorities were roped in, video clips were produced and gifts were even sent out. A shortlist of 10 and then 3 was created, with Hefei ultimately winning out over the southern city of Guangzhou and the central city of Xi'an. 

The event, called Nio Day, was initially introduced by the carmaker in 2017 in Beijing, where it launched its first electric model, the ES8 sports utility vehicle. Since then, it's become a yearly staple and a venue for Nio to unveil new models, get many of its customers together in one place and talk about future business plans. It is generally held in a stadium and top entertainers are booked. Past acts have included Imagine Dragons, Bruno Mars and popular DJ Alan Walker.

Nio's whole business model relies on creating a sense of allegiance among customers, who then persuade family and friends to spread the word about its cars. Chief executive officer William Li explained in an interview in June 2021 the strategy is called "rippling mode", invoking the ever-widening circles caused by throwing a single stone into a pond.

Indeed, he credits Nio's customers with saving the company from a near-death experience. In its first 4 years of existence, Nio had racked up US$5 billion of losses and was losing almost US$5 million a day by the second quarter of 2019. Sales of 8,000 cars in the fourth quarter of 2019 proved crucial to seeing the company through before the government of Hefei chipped in with a pledge to invest around US$1 billion. "That's why I always say that our customers saved us," Li said in June last year. "Even if we sold 500 or 1,000 fewer vehicles, that could have triggered a total collapse."

Nio, thanks to that customer loyalty, has gone on to thrive. Deliveries went from strength to strength in 2020 and exceeded 91,000 units by the end of last year. The company has been careful to keep investing in the relationship. For its first Nio Day in 2017, Nio paid for flights to the event and luxury hotels for anyone who had ordered an EV in the 12 months before production started. Now, car owners are doing the PR for Nio. For the Nio Day to be held later this year, the Hefei Nio owners club is extending free bags of rice for anyone who visits a Nio battery-swapping station and giving out free tickets to Anhui's main tourist attractions, including Yellow Mountain, a Unesco World Heritage site famous for its fantastically shaped granite peaks. 

Automakers who win the hearts and minds of customers stand to reap immense gains. Deliveries of new-energy vehicles (NEVs) in China (defined as pure electric cars and plug-in hybrids) more than doubled in July to around 486,000 units, accounting for more than a quarter of total new car sales, said the China Passenger Car Association (PCA). The PCA has also raised its annual sales forecast for NEVs this year to 6 million.

Other EV makers are seeking to follow Nio's lead. Zeekr, the electric car unit of Chinese automaking powerhouse Geely, has begun talking about "co-creation with users" for various stages of its business, including product design, marketing and community activities.

There are some question marks over whether this strategy will work long term. The money Nio has spent building Nio Houses - like private clubs for Nio car owners - isn't insignificant and forms a big part of the company's costs. (Zeekr now has Zeekr Spaces.) Chinese automakers are also still grappling with snap lockdowns to contain Covid. Those have caused production delays and supply-chain snarls, further pressuring profitability.

As Lin Wenbin, the head of business analytics at marketing platform of Douyin, put it: "With the increase in new-energy vehicles and consumers' acceptance of cleaner energy cars, customers are becoming more picky and less tolerant. The most competitive companies will be those that can recognise the changes and adapt." BLOOMBERG



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