China's Nio is cutting car prices to take on Tesla but is also ending free battery swaps

Tesla has slashed prices six times this year, forcing EV makers to follow suit
Nio listed in the New York Stock Exchange in September 2018.
Nio listed in the New York Stock Exchange in September 2018.
Photo: Brendan McDermid (Reuters)
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Chinese e-carmaker Nio has slashed prices barely two months after saying that price wars in the EV market were a bad idea.

The company said it is cutting its car prices by $4,200—6%-9%—from today (June 12) as it looks to take the competition to its rivals Tesla, Xpeng, BYD, and Li Auto amid lukewarm sales and even losses. In January, Tesla slashed prices of its China-made cars by about 14%, making them almost 50% cheaper than those sold in the US.

Nio, which builds a range of sedans as well as mid-and full-sized SUVs, meanwhile, has also said it will discontinue its free battery swapping service immediately once the new prices take effect.

Battery swapping is difficult to standardize

This service’s viability was questioned by investors who said it lacked standardization and, hence, was a loss-making venture.

In April, CEO William Li told CNBC that the company had no intention of joining an EV price war. “For us, we will certainly not join the price war,” Li said, saying Nio’s products and services were worth the price. However, he did acknowledge that “challenges will certainly be greater and greater.”

Li said Nio would rather focus on improving customer services by adding new offerings like enhanced battery-swapping and more charging stations. The company’s battery swapping system was said to complete the process in minutes, saving customers precious time.

Founded in 2014 in Shanghai, Nio was one of the few EV firms that offered such a service with even Tesla dismissing it as unsustainable on a larger scale.

Nio is ranked third in China in terms of EV stock attractiveness, with a market capitalization of $13 billion.

The company had indicated that, beginning June 1, prospective buyers who put down deposits for some of its models would only get to use its battery swapping service for free four times a month. A month before that, it allowed up to six free swaps.

Sales of Nio’s electric cars increased by 31% in April from a year earlier. This month, the company announced that it delivered 43,854 new vehicles in the first five months of 2023, a year-on-year increase of 15.8%. The number of cumulative deliveries reached 333,410 on May 31.

But despite the intensified price wars, and losses amid weakening demand, Tesla continued to see sales rise. Nio, meanwhile, reported a sharp drop in gross margin to 1.5% in the first quarter of this year, down from 14.6% a year ago and 3.9% in the fourth quarter of 2022.