Chinese EV makers should brace for protectionist policies, Nio CEO says

SHANGHAI -- Chinese electric vehicle makers should brace for the possibility of protectionist policies being leveled against them by foreign governments as they seize on their cost advantages to expand exports, the founder of Chinese EV maker Nio said.

William Li told reporters during a roundtable discussion on the even of the Shanghai auto show that Tesla recently revealed manufacturing in China is 20 percent less expensive than  Europe and the United States. That means Nio and peers building and exporting cars from China have an advantage over rivals.

Nio and fellow Chinese brand such as Xpeng and BYD have set their sights on winning more customers abroad, especially in Europe, as demand weakens in China. Renault's Dacia brand, Tesla and BMW are among foreign brands making EVs in China and selling them abroad.

"After exports grow and grow, market protectionism will definitely happen. It is not a good thing for global sustainable development, but we must respect that every country has considerations for protecting local industries. This is the reality we must face," Li said.

The European auto industry is at a crossroads in competition with Chinese rivals, Stellantis CEO Carlos Tavares said in January.

If politicians in Europe do not find an answer to the push into Europe by Chinese automakers, there will be a "terrible fight," Tavares told Automotive News Europe sister publication Automobilwoche on the sidelines of CES 2023 in Las Vegas.

Chinese companies are expanding in Europe with competitive and aggressively priced vehicles, Tavares added.

Nio plans to intensify its European expansion as the price war in its home market squeezes margins.

Li said the price war will make it even more challenging for the brand to reach its goal of achieving financial breakeven with its automotive business in the fourth quarter of this year.

Nio will not participate in the price war, led by Tesla, because Li said it will hurt residual values and potentially damage customer relations. He added that the Tesla Model 3 is now the equivalent of $20,000 cheaper than Nio's entry model.

"So, in terms of starting prices, we [Nio and Tesla] are not in the same segment anymore," Li said.

Nio will unveil a model next quarter that caters to European demand for compact cars and that will also be sold in China, Li said.

Next year, the company will launch a brand of vehicles for the European market that will be made at a new factory in China, Nio President Lihong Qin said at the show.

The project is code-named Firefly

Reuters reported in February that Nio plans to build a factory to produce budget EVs under a new brand for export to Europe.

Nio offers six models and plans to launch five more this year under its own brand. The Nio brand is positioned for the premium segment to compete with BMW, Mercedes and Audi.

Douglas A. Bolduc and Bloomberg contributed to this report