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Electric cars in China

China's Nio dismisses EV rivals' threats despite chip crunch

CEO says traditional players need to be 'more decisive' in adapting

A NIO eT7 sedan on display during Auto Shanghai 2021 this month. Nio plans to deliver the model next year.   © Getty Images

HONG KONG -- The founder of Chinese electric vehicle maker Nio has shrugged off the efforts of established automakers to develop EVs and said his company faces no meaningful challenge in the premium market in China.

Nio, which has emerged as the top homegrown challenger to Tesla in China's EV market, reported a narrower loss and improved gross margin in the first quarter of its financial year. But deliveries fell short of its target after a global shortage of auto chips led Nio to suspend production for five days.

"In the premium market, we have not seen any brand comparable to our competitiveness yet, in terms of the product, services, technology and user experience and customer community," Nio Chairman and CEO William Li told analysts during an earnings call on Friday.

Nio sells three sport utility vehicle models China -- all more expensive than Tesla's popular Model 3 sedan -- and plans to deliver its first premium sedan model, the ET7, early next year.

Traditional automakers are still "lagging behind" in terms of digital experience and autonomous driving capability, Li said.

"It will be quite important for [traditional carmakers] to be more determined and decisive in transforming themselves into this new era of smart electric vehicles," he said.

Established high-end brands have been slow to launch EV models in China. Mercedes-Benz's first electric SUV for China, launched in late 2019, was poorly received by customers, while BMW had to slash prices for its all-electric iX3 SUV model in China to boost sales.

Li warned that the global auto chip shortage will continue to weigh on production. "The current situation in the market is quite volatile, and we have been tracking chip supply every day," he said.

A global shortage of semiconductors is plaguing the auto industry because vehicle sales recovered more quickly than expected from the coronavirus pandemic. Many manufacturers had cut chip orders in anticipation of weaker sales. Chipmakers have not been able to ramp up production to meet the resurgent demand.

Li also noted that a fire in March at a chip factory owned by Renesas Electronics in Japan, which halted production, will start to have an impact on the global supply chain around mid-May. Renesas has about 20% of the global market for microcomputers for cars and other machines.

"For the full quarter [Q2], we believe it will still be possible but quite challenging for us to achieve 7,000 to 7,500 production units per month," Li said. Nio's China factory has a monthly production capacity of 10,000 vehicles.

In response to a question about whether Nio has a plan to make its own chips, Li highlighted the importance of top players investing in research and development of key hardware and software. But he said there is no specific plan to disclose at this stage.

"In the smart EV segment, we believe the industry will look to chips, software and other smart technologies," he said, adding the company is committed to investing in autonomous driving and other advanced technologies.

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