Major Tesla competitor doubles down on second brand (here's when)

The Chinese automaker has big plans for Europe in 2025, but it's still working on a plan to enter the American market.

Dec 16, 2023 - 03:30

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The Firefly is getting ready for takeoff.

Chinese electric vehicle maker Nio (NIO) - Get Free Report is reportedly working on a plan to enter the American market, though the dates are a little hazy.

“We are still in the planning stages, and the colleagues working on this plan are under considerable stress,” CEO William Li said, according to WardsAuto.

Li was speaking to the media ahead of the annual Nio Day presentation set to take place Dec. 24 in Xi’an.

Last month, Reuters reported that a company executive said Nio was still "debating" a 2025 entry in North America.

Ganesh Iyer, CEO Nio USA, said the company is considering "any kind of partnerships" in North America.

Nio also needs to build infrastructure before bringing electric vehicles to North America, he said.

Targeting Europe

As far Europe, well, that's another story. Company president Lihong Qin told reporters that Nio will launch its cheaper Firefly brand in Europe in 2025.

The Firefly and Alps brands will produce cars for families, with Firefly offering smaller models and competing with such EV automakers as Volkswagen (VWAGY) - Get Free Report, Renault (RNSDF) - Get Free Report and Ford (F) - Get Free Report.

Alps will support three models in its initial phase with retail activities taking place through an internet-based direct sales channel.

Li said that “right-hand-drive prototypes do exist, but we will first focus on understanding and establishing ourselves in European markets.”

In addition, Li confirmed Nio is working on a “high-end model” aimed at further establishing EV manufacturer as a reputable competitor to the likes of Audi, BMW (BMWYY) - Get Free Report, Mercedes-Benz (DDAIF) - Get Free Report and Porsche (POAHF) - Get Free Report.

“The mass market will be handled by our second brand,” Li says. “The Nio brand will pursue breakthroughs and innovations in technology. Being technologically advanced is essential to create a high-end brand. The volume of this model won’t be as high as everyone expects.”

The company is facing some challenges. Nio announced plans to cut 10% of its workforce last month and may eliminate more positions, Bloomberg reported on Dec. 7.

Some departments were asked to prepare reserve lay-off lists, which may widen the original dismissals to 20% to 30% within the unit.

The cuts would apply mainly to non-core businesses or ones that would not generate quick returns or require heavy investment.

Europe weighs tariffs

Deutsche Bank reiterated its buy rating on Nio on Dec. 13 and cut their 12-month price target on the stock to $16 from $17.

The bank's analysts said the company’s growth trajectory “appears somewhat weaker than expected despite having multiple new models fully ramped up.”

“This seemingly reflects a problem in its sales structure, which now must be significantly expanded to better compete against legacy premium peers,” Deutsche Bank said.

“While we don't see large downward pressure on demand, the emergence of this situation impairs management's credibility after it had just regained some over the last few months," analysts said.

Chinese EV makers are drawn to Europe because auto import tariffs are just 10% versus 27.5% in the U.S., independent auto analyst Matthias Schmidt told the Associated Press. Europe also has the world’s second-biggest EV battery market after China.

In October, the European Commission formally launched the investigation into whether to set tariffs to shield EU producers from a "flood" of imports of cheaper Chinese EVs it says benefit from state subsidies.

Chinese officials said the probe lacks adequate evidence and does not conform to World Trade Organization rules, the country's commerce ministry said in a statement.

China also urged the EU to safeguard the stability of the global supply chain and a strategic partnership between the two, while "prudently" applying trade remedies.