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Chinese automaker Nio warns energy crisis will slow European expansion

The president of Chinese electric car maker Nio has warned that Europe’s energy crisis is slowing expansion in the region as it seeks to capture dominant players such as Mercedes-Benz and BMW.

The group’s founder and chief executive, William Lee, said rising energy costs were one of the obstacles for the company to roll out battery swapping stations across Europe.

In contrast to rival automakers that rely on recharging batteries, Nio uses a system of exchange stations that removes batteries and replaces them with new ones in just minutes.

“Currently, we are behind schedule in terms of setting up the swap station, but that is due to multiple reasons, including electricity costs,” Li said in an interview. Slower-than-expected approval of the plan and the need to train workers also hampered deployment, he added.

The company started selling electric cars in Norway last year. This is his first time outside of China, but he has only two operating exchange stations in the country, and he had fewer than five projected at the beginning of the year.

Seen as one of China’s main challengers to Tesla, Nio is betting that success at home will be the starting point for beating out Europe and the US. The group, whose shares are listed on Wall Street, has ambitions to have 1,000 of his charging stations outside China by 2025, with the majority in Europe.

Li, who founded Nio in 2014, said rising raw material prices would push up the cost of batteries, which would delay the group’s goal of becoming profitable in the short term. The group posted a net loss of $411 million in the second quarter.

“Profitability is still our goal, but the most important thing is to find the right cadence to make it profitable,” he said, adding that while funding aggressive international expansion, the Chinese business pointed out the cost of growing

Nio already has about 800 stations in big cities in China and expects to reach a total of 4,000 by 2025.

“We were very quick and efficient in China,” said Li of the rollout of battery exchange stations. “Then we really couldn’t manage our expectations for the European market and our actual speeds are actually below expectations.”

The company relies on the same model that works in Europe, despite the lower population density and the need to install more stations.

Given that batteries can make up a third of an electric vehicle’s price, Nio believes its model of giving drivers the option of selling the car and leasing the battery outstrips its competitors. We believe that it will bring a bigger market.

In Norway, where cars began to be sold last September, about 95% of customers lease batteries rather than buy them with the car.

A further hurdle for deployment in Europe is the need to install a transformer. This is integral to the station’s operation and can take up to two years to build. Li also pointed out the difficulty of obtaining planning permits for stations.

“It takes more than hours of effort to actually contact and get permission from all these authorities and offices,” Li said.

The New York-listed automaker in 2018 will consider setting up a manufacturing plant in Europe if sales in the region reach 200,000 units.The group sells about 240,000 cars worldwide. and only a handful outside of China.

Li, a serial entrepreneur, dismissed concerns that US and European consumers could be wary of buying Chinese cars given strained political relations. US consumers continued to buy Japanese cars even when the two countries fought a trade war in the 1980s, he noted.

https://www.ft.com/content/e4739790-b0fc-48e6-8f81-2759f4275253 Chinese automaker Nio warns energy crisis will slow European expansion

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