NIO Will Mass-Produce a 400,000-Yuan Electric SUV Next Year. It Still Has to Prove Contract Manufacturing Can Build a Car

Its partner JAC mostly builds cheap family cars that sell for under 100,000 yuan.

Over the weekend, NIO unveiled its first mass-production model, the ES8, at Beijing's Wukesong Arena. The ES8 is a large electric SUV with a wheelbase of more than three meters, seven seats, 650 horsepower, a 70 kWh battery pack and a combined NEDC range of 355 kilometers.

At the launch NIO dwelled on the car's luxury-grade specifications: leather upholstery, a front passenger seat modeled on an airliner's first-class cabin, and Nomi, an onboard AI companion with a face that changes expression. NIO's founders include the men who founded Bitauto and Autohome, China's two biggest car websites, so they know their way around a spec sheet.

The ES8's exterior is distinctive — you can't find another car in it. It doesn't look radical. It is a conventional three-row SUV shape, without the streamlined curved roof of the Tesla Model X, and it is more down-to-earth than the FF91 that Jia Yueting's Faraday Future once showed off. The one surprise is that the ES8 has a front grille, something an electric car does not need at all.

Functionally, apart from the flush door handles, the ES8 has four ordinary doors and a tailgate. It challenges almost no existing idea about what a car is.

At the launch, founder Li Bin kept repeating that the NIO ES8 costs half as much as the Tesla Model X.

NIO said the lower-specification base ES8 would sell for 448,000 yuan. On the slide, the price was marked "before subsidy," with a note explaining that under the 2017 subsidy rules a buyer would actually pay 375,400 yuan.

NIO put up a comparison table setting the ES8 alongside cars with similar performance — the Tesla Model X, the Range Rover — and said it was the cheapest of them.

But none of that was the point. All of it, including the 4.4-second 0-to-100-km/h time, was done within the first 17 minutes. The remaining hour or so went to other subjects: artificial intelligence, autonomous driving, and how to solve the range problem for electric cars.

NIO Is the First Internet Car Company to Announce Mass Production

In April 2017, NIO showed a physical ES8 for the first time at the Shanghai Auto Show. In October, spy photos of the ES8 inside the factory of its contract manufacturer, JAC, appeared on social media, the "JAC NIO" badge on the tailgate plainly visible.

At the launch, NIO said it had already trial-built some cars and was road-testing the ES8, and that mass production and sales — more than 1,000 units — would begin in the first half of 2018.

At the weekend launch, Li Xiang, one of NIO's investors, drove an ES8 onto the stage, showed off basic things like the seats and the cabin space, then drove it off again. During the autonomous-driving segment, an ES8 rolled slowly out from backstage with nobody at the wheel, stopped center stage, and drove itself away when the pitch was over.

In early December 2017, the Ministry of Industry and Information Technology published its Catalogue of Recommended Models for the Promotion and Application of New Energy Vehicles (2017, Batch 11), which included the JAC-built "NIO-brand" battery-electric multi-purpose passenger vehicle — the NIO ES8 — on the subsidy list. That meant it had passed the ministry's certification and could go on sale.

Less than two years had passed since NIO and JAC signed their agreement in April 2016 for JAC to build cars for NIO.

NIO Has Not Yet Proved That Contract Manufacturing Can Build a Reliable Car

Even if volume production starts in April 2018, two years is very fast. Tesla was founded in 2003. It spent five years proving the idea with the hand-built Roadster sports car before announcing the Model S program in June 2008, then bought Toyota's old Fremont factory in October 2010, and only began mass-producing and delivering the Model S in June 2012.

It took Tesla four years to go from deciding to build a car to building one. NIO says it needs half that.

NIO's promotional playbook looks a lot like Tesla's.

Nelson Piquet Jr., driving for the team NIO sponsored, won the drivers' title in the 2014-2015 season of the FIA Formula E Championship, the first season of the FIA's top-tier electric racing series, and NIO, as title sponsor, got a great deal out of it. Over the following seasons, NIO said it was starting to develop electric race cars of its own.

In 2016, NIO's Formula E division built the EP9, an electric supercar, in a run of nine, and set a new electric-car record at the famous Nürburgring Nordschleife — 6 minutes, 45.90 seconds — the second-fastest lap ever among all prototype cars. The EP9 is not a production car: it was never offered to customers in the first place, and only a dozen or so were built.

Like the Tesla Roadster, the EP9 was a device for showing off technology. But more than 2,000 Roadsters were built, and Tesla still needed several more years to get its later models into mass production.

NIO launched the EP9 in 2016 and next year plans to mass-produce a car costing 400,000 yuan. It can move this fast because it has no factory: JAC builds the car. NIO calls the arrangement "cooperation" — NIO puts up the money, uses partner JAC's manufacturing license to build the production line, and then has JAC's workers run it.

At the press conference NIO held on Sunday, chairman Li Bin explained it this way: "What matters most in a car's quality is design and R&D, components, and production guidance, and the first two account for the overwhelming share of it." He said NIO's design was done by an international team and that 70% of its component suppliers were major international brands supplying their newest products. He added that the line JAC built for NIO uses the most advanced industrial robots in the world, so there is no question about NIO's quality.

Given the state of the car industry today, production matters enormously too, alongside design, R&D and components. And the manufacturing process that guarantees a car's quality takes experience.

Tesla began mass-producing the Model S at its new Fremont factory back in 2012. Five years later, having designed two entirely new cars, it ran into far worse production trouble with the mechanically simpler Model 3. That is how hard it is for a new car company to learn to build cars.

A car is a complicated machine, and small problems turn up in production. QDaily once visited Audi's "quality department" in Germany, and Audi showed us one case. The new A8's center screen is an OLED display with force feedback. The quality department found that when the force-feedback vibration motor ran, it resonated with the glass panel over it and made an audible noise. Quality control caught the problem while testing the center screen and then told the supplier to fix it, which it did by adding a rubber gasket.

Big-name suppliers alone, with the parts simply bolted together, cannot guarantee quality.

And JAC, the manufacturer NIO picked, has no experience at all building cars costing 400,000 to 500,000 yuan. JAC's main passenger-car product, the small Refine S3 SUV, is a cheap model selling for under 100,000 yuan. Besides cheap SUVs, JAC makes trucks and commercial vehicles.

Apart from its still-early joint venture with Volkswagen Group on electric cars, JAC has never run a joint venture with a foreign brand.

Whether JAC can build expensive cars is hard to say — what a carmaker builds is decided by what it can sell. But one thing is certain: it has never built a car at this price.

When QDaily asked in an interview how NIO's quality ceiling could rise above JAC's own, Li Bin reached for Foxconn: "Foxconn can make Apple products and it can make Xiaomi products. Actually I don't think the Xiaomi comparison is a good one, because Xiaomi's quality is even better than Apple's." As if building cars and building phones were comparable at all.

At the press conference Li Bin spent more time on how bad the Tesla Model X's quality was. He said: "If we delivered cars today to Tesla's 2013 quality standard, which of you would buy one?"

By the launch's own account, the NIO ES8 is an SUV built from better materials than the Model X, with an all-aluminum body, for half the price.

In the end NIO will need the quality and the volume of its production cars to prove that contract manufacturing solves everything.

To Answer the Range Question, NIO Told Two Unusual Stories

NIO made a point of saying the ES8 is one of the highest-aluminum cars in the world, and that the main purpose of the aluminum is to cut weight. It also said the ES8 uses prismatic lithium-ion cells from CATL, with a higher energy density than Tesla's 18650 cells.

A lighter body and higher energy density ought to mean better range. But according to the product data published by the Ministry of Industry and Information Technology, the ES8's curb weight is 2,460 kilograms, close to that of the equally electric Tesla Model X P90D at 2,459 kilograms. At the same weight, the Model X P90D's real-world range on the US EPA test is 257 miles, about 413 kilometers. The ES8's stated 355 kilometers is 14% less.

On charging, NIO said it has struck a strategic partnership with the State Grid, and that NIO cars going on sale can use every standard and fast charging point the State Grid has already installed. Public figures put the State Grid's national total at more than 45,000 charging points, shared by every electric car in China today, Teslas included.

Beyond the conventional methods, NIO showed two very unusual ways of meeting drivers' range needs: quick battery-swap stations and mobile charging vans.

On stage, NIO had built a "swap station" much like the one in its promotional images. It looks like a garage occupying about three parking spaces. Once an ES8 drives in, mechanical fixtures in the floor lock the wheels, and a robotic arm takes the entire battery pack out from under the car and puts a new one in. NIO says the whole swap takes about three minutes; on stage it took 2 minutes and 56 seconds.

NIO says it will build more than 1,000 swap stations across the country before 2020, covering first-tier and other major cities. At Sunday's press conference, chairman Li Bin said NIO would build and run the stations by itself, and serve only NIO cars.

Battery swapping is not a new idea. In June 2013 Tesla showed technology that could replace a Model S's entire battery pack in 90 seconds, much like what NIO demonstrated. After building one experimental swap station, Tesla shelved the plan in 2015.

By Tesla's own numbers, a swap station was expensive to build: more than $500,000 in 2013, at least four times the cost of a six-stall Supercharger station.

At the press conference Li Bin refused to give the cost of a NIO swap station, calling it a trade secret. At Tesla's $500,000, building 1,000 of them would take 3 billion yuan — a large sum, half of the US$1 billion, or about 6.6 billion yuan, that NIO has publicly raised to date.

That still leaves out the spare battery packs the stations need. NIO has to buy those from CATL, while Tesla owns the largest battery factory in the world and can make its own.

The other, stranger plan is called the "mobile charging van."

NIO bought several hundred V80 electric vans from SAIC Maxus and fitted battery packs in the cargo bays. A driver who strays too far from the existing charging points and swap stations can call one of these vans with a phone app. NIO says it can deliver 100 kilometers of range from a 10-minute charge.

Chairman Li Bin said that if a customer wanted to drive to Tibet, that would be fine too: "Worst case, we'll send a mobile charging van to follow you." He seemed to be half-joking, showing NIO's determination to solve the range problem. At the launch he said the goal was to make charging an electric car "more convenient than filling up with gas."

The logic of the mobile charging van is simple. Electric cars are not yet mainstream, and charging points and swap stations, which are obviously expensive to build, cannot be everywhere yet. So to let an electric car "go anywhere," you need an oversized power bank that follows it around. Put another way: you need to charge your phone while out, power outlets are scarce, so you hire someone to walk behind you carrying a battery.

The short-wheelbase V80 cargo van NIO bought is itself an electric vehicle, with a 60 kWh lithium iron phosphate battery and a combined-cycle range of under 170 kilometers. Load a second battery pack in the back for mobile charging and that range drops further.

Which means these vans can only handle short-range emergency rescues around a city. Li Bin's picture of a van following a driver to Tibet simply cannot happen. And a battery's dry weight barely changes whether it is charged or empty. Since the van has to drive back to recharge itself and its battery pack, the electric "mobile charging van's" own range is squeezed again, and the service gets less efficient still.

The last question is how NIO will sell these cars.

Reports of cuts to new-energy-vehicle subsidies over the next two years keep coming, so those can't be counted on. NIO's main advantage is the license-plate restrictions in Beijing and Shanghai. If NIO builds the car it advertised, and the production version comes close to the Tesla Model X at half the price, it really would be a competitive choice among electric cars.

After that comes the brand. A car is, in the end, a branding business — it already costs more to sell a car than to pay the labor that builds it.

In the 300,000-to-400,000-yuan range there is a crowd of mid-size and large SUVs to choose from: the Highlander, the Teramont, the Enclave. They have no "autonomous driving" that can drive itself onto a stage and no onboard assistant that acts cute for you, but you don't have to think about how far the nearest charging point is, and people have heard of the brands.

Of course, before any of that competition starts, the first step is still getting mass production right.

Cover image photographed by QDaily