NIO’s Red-Hot ES8 Is Already Outselling Tesla In China

I have highlighted NIO in previous Forbes articles as an important new player in the market for China’s high-end battery-electric vehicle (BEV) market.  NIO’s chairman, William Li, has noted that his ES8 is targeting Tesla, although as I noted in another Forbes article, the ES8 retails for less than half of the new, tariff-adjusted price Tesla is charging for the Model X in China.

NIO started to trickle out ES8s to employees and investors in late May, and I expected a gradual sales ramp to match the ones we have seen from Elon Musk’s Models S, X and 3.  China’s BEV market (excluding hybrids) continued to grow rapidly in July, with 47,538 units delivered and over 300,000 units delivered year-to-date. The monthly figures also contain company-level detail, and one figure jumped out of the numbers:

NIO delivered 1,331 ES8s in China in July. Thus, by my calculations, NIO is outselling Tesla in China.  Already.

BEIJING, CHINA – APRIL 25: A NIO ES8 electric sports utility vehicle (SUV) is on display during the Auto China 2018 at China International Exhibition Center on April 25, 2018 in Beijing, China. Auto China 2018, also known as 2018 Beijing International Automotive Exhibition, will be held from April 27 to May 4. (Photo by VCG/VCG via Getty Images)

These figures come from the Chinese Passenger Car Association and do not include imported models.  Thus, there are no accurate figures for Tesla’s Chinese deliveries on a month-to-month basis. Last year Tesla delivered 14,833 vehicles in China, and Bloomberg has estimated Tesla’s 2018 deliveries are running in the 800 to 1000 unit per month range.  

So, the conclusion that NIO is outselling Tesla with one model compared to Tesla’s two (with the Model 3 on the way) is inescapable.  I would expect this lead to widen as NIO’s ecosystem continues to grow in China. The company has NIO Houses–something of a cross between an Apple Store, a Starbucks and a college student union–in every major Chinese city and plans to open seven more in the third quarter.    

NIO has carefully cultivated its brand–Wei Lai in Mandarin, or “blue sky coming”–to eco-conscious Chinese consumers and the fruits of that are paying off.  Plus, the vehicles are made in Shanghai, and can be easily delivered to the local market, where consumers who opt for BEVs avoid waiting lists for license plates, among other benefits.

NIO’s last funding round was led by Tencent, which had invested in Tesla’s last public offering of equity.  Musk’s now-infamous “funding secured” tweet has drawn tremendous media scrutiny, but it is more useful to look at those that have funded Tesla in the past.

Does NIO’s red-hot start make it less likely that Tencent would invest in a go-private transaction for Tesla at the fantastical valuation (25x 2019 EBITDA) that Musk has proposed?  I would think so, but I do not have any sources at Tencent’s headquarters in Shenzhen, so that is just speculation.

The ES8’s smashing debut should remind investors, however, that the auto industry is truly global. Every major global automaker–other than Tesla–is well-capitalized in the ninth year of an economic expansion in the West.   That capital is being deployed to capture share in the Chinese market, where BEVs are more than just a curiosity, and I would not expect any change in global automakers’ strategy since China is in at least its 20th year of economic expansion.

Elon does not have the only game in town.  Scarcity value is a huge driver of M&A valuations, but a look East shows that high-end BEVs just aren’t that scarce.

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