Chinese automaker Nio has just reiterated its plans to penetrate the US electric vehicle market by 2025. However, it intends to import its premium cars rather than establish domestic production to benefit from the federal tax credits.
Plan details
NikkeiAsia reported NIO USA Chief Ganesh Iyer’s announcement at China Project’s NextChina Conference in New York on Thursday.
Apparently, Nio still plans to bring its first model offering to the US market by 2025 as it aims to penetrate 25 nations and regions beyond China.
“My goal, and my commitment to this company, is I want all of us to buy a Nio car from our personal paycheck one day. I hope that ‘one day’ will be sooner, which means we need help from everyone — government, policymakers, supply ecosystem [and] infrastructure readiness.”
Ganesh Iyer, Nio USA CEO
Disadvantaged position
Despite Nio’s innovative electric cars and technologies, it remains in a disadvantaged position in the US market.
The Chinese automaker does not plan to have its own local factory in North America, making it ineligible for the US federal tax credits of up to $7,500 under the Inflation Reduction Act.
“You don’t want to drop the price just for the sake of dropping the price. So as the IRA is written today, from a strict price standpoint, our vehicles will not qualify for IRA. Period.”
Ganesh Iyer, Nio USA CEO
According to the company executive, Nio came up with three US states for choosing the location of a potential factory. However, it determined that building a domestic production hub would be too expensive. It believes that importing would be more strategic and cost-effective for the company’s expansion plans.
“For our products, there are a lot of local suppliers in China who exclusively provide to us. They don’t do business in the US.”
Ganesh Iyer, Nio USA CEO
It is also worth noting that the US has a 27.5% tariff on China-made vehicles imported into the country. In response, NIO CEO William Li called for the US Government last July 2023 to offer the same treatment China gives to Tesla.
Challenges
In hindsight, NIO China CEO William Li stated that the company will lay off 10% of its current workforce, Electrek reports, citing an internal memo studied by Bloomberg Friday.
“This is a tough but necessary decision against fierce competition.”
Nio China CEO William Li
It is a major effect of the intensifying price war in the world’s largest auto market, which prompted Nio to lower EV prices by $4,200 (30,000 yuan) in June.
It also remains unclear if Nio would be able to actually pursue the said plan in 2025, considering the changing market environment.
“That’s what we said two years ago, but things are changing.”
Ganesh Iyer, Nio USA CEO
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Nio will undoubtedly struggle in the US market, considering that most of its American rivals access the IRA’s $7,500 tax credits and other state incentives.
The Chinese automaker sold a record 55,432 EVs in Q3 2023. However, it has continued to struggle with increasing losses so far this year.
