NIO Fights for Brand Recognition: Car Showroom Expenses May Exceed R&D
(Yicai Global) July 31 — The operating expenses of China’s online order-based car firms’ showrooms may even exceed the companies’ investments in research and development amid fierce competition for brand awareness, an anonymous source from Tencent-backed electric automaker NIO told Yicai Global.
NIO invested CNY80 million (USD11.7 million) in a store in HKRI Taikoo Hui’s retail complex in downtown Shanghai, and pays an annual rent of about CNY80 million for a shop in Beijing’s Oriental Plaza mall and more than CNY100 million for the showroom in the iconic Shanghai Tower, earlier media reports show.
The experience centers of NIO are located inside landmark buildings, said Li Bin, founder and chief executive of the Shanghai-based carmaker, adding that securing such rental property from brand-conscious property-owners it is almost as challenging as obtaining a license to produce smart cars.
Renting an area of more than 1,000 square meters in such landmarks as Shanghai Tower can be very costly, a top executive for the Asia-Pacific region with a world-renowned electric automaker told Yicai Global. “How many cars does a firm need to sell to earn the rent?” NIO’s first sport utility vehicle ES8 costs CNY448,000 (USD65,700) in China, which is about half of the price of Tesla’s Model S sedan.
Overseas brands, especially European high-end ones, including Audi, BMW, and Mercedes-Benz, will boast greater advantages in the Chinese market after the local government lowered the tariffs on imported cars, the source at NIO who wanted to stay anonymous told Yicai Global, adding that a stronger brand image, coupled with core technologies, is the only way to compete with these premium brands.
Above the brand awareness issue, a greater challenge for the emerging carmakers is their failure to obtain the license to produce vehicles, which makes them dependent on manufacturing through contracting.
NIO said its SUV ES8 was delivered at the end of June. Yicai Global learned that the first batch involved cars in the scale of hundreds. NIO is expected to churn out 10,000 electric vehicles by this September.
NIO has started building its first electric vehicle factory in the district of Jiading in Shanghai, as part of its efforts to secure the production license. The factory is slated for completion by the end of next year, the anonymous source said.
Editor: Emmi Laine