Nio’s affluent fanbase might save it from failure

6 min read
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Nio held its annual launch event Nio Day in Shenzhen on Saturday, December 28, 2019. (Image credit: Nio)

Piano teacher Sun Lei drove her Nio ES6 from her home in Guangzhou to Shenzhen twice per week in December. With a round trip of 5 hours, she had to make sure she had enough time to practice ahead of the big day.

The moment came on Dec. 28 when Sun took to the stage at the annual Nio Day event with 16 other members of the makeshift group “Blue Sky Chorus.” They sang of the virtues of owning a Nio to the thousands of fellow fans in attendance.

“I am a super fan of Nio and everything was worth it,” Sun said. She first volunteered to compose the performance after growing tired of stories in the media bashing the company. Sun wanted to set the record straight and share her positive experiences as a Nio owner. The company was not directly involved in organizing the performance though it did ask for volunteers to take part in Nio Day.

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Singing group “Blue Sky Chorus” performs at Nio Day 2019 in Shenzhen. (Image credit: Nio)

The NEV maker has adopted an Apple-style community strategy seldom seen in the auto sector, forming a tight army of devoted users to promote its cars to potential buyers. Early EV adopters from all walks of life—executives, business owners, and professionals—act as informal sales staff repaying the struggling company for the plethora of “user-centric” services offered.

The efforts started bearing fruit in the second half of 2019. Nio reported a robust 35% month-on-month rise in vehicle deliveries in the third quarter, followed by another 70% jump for the three months after. And, more notably, existing owner referrals accounted for more than 45% of the 20,000 or so shipments last year. Several car owners from the advertising industry even took it on themselves to launch their own local promotional campaigns to help the company in cities including Qingdao and Wuhan, Nio Chief Executive William Li said at the event.

Still, the much-heralded “Tesla of China” continues to bleed money. Cash is tight and it will struggle to see out the next 12 months of operations without external financing, according to its latest earnings report. However, Nio firmly believes that the relentless support of its users constitutes a trump card for the NEV maker ahead of an unlikely comeback.

Nio Day 2019

Thousands of auto enthusiasts descended on Shenzhen, southern Guangdong province, on Dec. 28, to attend Nio Day 2019. Top of the bill at the annual user event was the new EC6 sporty SUV.

This year’s event was smaller than previous incarnations, real estate veteran and Nio devotee Tom Tian told TechNode. The first-ever event at Beijing’s Wukesong Stadium in 2017 drew a crowd of 10,000, all fixed on the eight cars showcased on stage. That year, Nio unveiled China’s first EV recharging service solution, and an in-vehicle smart speaker, alongside its debut mass-produced ES8 model. A performance from US pop-rock group Imagine Dragons rounded off the show.

For many Nio fans, the company has been at the forefront of China’s push to become a global manufacturing superpower. Aspirations of becoming the country’s most innovative NEV maker brought in followers in their droves and they continue to stand by to this day.

Nio-lievers: China’s emerging middle class

Tian, also a go-karting enthusiast, first came across Nio in November 2017 at a test-drive event for the EP9 supercar at a circuit in Beijing. A year later and he was the 4,220th owner of the ES8 SUV model—Nio assigned numbers to the first 10,000 vehicle owners. He already had two cars including a Mercedes GLE, which he now rarely drives.

Tian drives his Nio to work each day in the capital where NEVs are not subject to the same restrictions as traditional gasoline-powered autos. He also does so essentially at no cost, thanks to Nio’s battery-swapping service that switched to a free-for-users model last August.

Tian is not alone. Chang Luqiu went electric at around the same time. Previously torn between Tesla and Nio, he made up his mind after watching the first Nio Day in 2017. Chang gifted his BMW sedan to his mother and now drives an ES8 to work every day. “I feel proud to be a Nio owner,” Chang said.

Nio’s army of loyal fans come mainly from China’s growing middle class. TechNode spoke to multiple owners including business owners and corporate managers. Riding the crest of a wave of China’s phenomenal economic growth over the past 30 years, these educated professionals are well-paid and come from industries such as real estate, technology, and finance.

The country is now home to more than 33 million households with a combined annual income of RMB 200,000 ($29,000), according to a report from Hurun, the research firm behind China’s annual rich list report. Having achieved financial security in the early years, these progressive affluent spenders are globally minded and hard to please. They have grown a refined sense of quality related to global brands and seek emotional satisfaction through this taste.

The Nio Day excitement hit a crescendo as CEO William Li took to the stage. The crowd greeted him with loud cheers and even sobs. Nio fans refer to him as “Brother Bin,” using his first name. While sheer patriotism does explain some of their devotion, there are also other factors at play.

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12 Nio owners set up a charity garage sale at 2019 Nio Day in Shenzhen and raising around RMB 25,000 for two Chinese charities. (Image credit: TechNode/Jill Shen)

Community is ‘the only way out’

The events of this year’s Nio Day were unthinkable. Some 17 Nio owners formed the “Blue sky chorus,” spending a month of writing and rehearsing a song together to express their love for the brand. Over 150 others volunteered to pick up attendees from nearby airports and train stations before the event.

What’s more, the devotion is transforming into tangible benefits. CEO William Li attributed a 25% rise in Q3 sales to a “thriving and growing” community, adding that nearly half of new orders came from existing owner referrals over the past year. Nio President Qin Lihong told TechNode that offering the best user experience consistently to gain their continuous support is “the only way” to help the company out of its financial predicament.

These affluent customers are repaying the company’s efforts. Li pledged to build a user-centric enterprise and has invested heavily since the beginning of operations in 2014. The company has built 22 clubhouses nationwide featuring bespoke design elements. They offer users a space to hang out, read books and even leave their children for daycare. In the case of property veteran Tian, all eight Nio owners in his neighborhood know each other.

The expensive added-value retail and club strategy has helped the company form its own private social network as well. Nio claimed its users organized and joined in over 16,000 activities last year via its app. These included attending lectures, making dumplings, and playing football. These middle-class Chinese with time, money, and status are able to socialize, show off their talents, become leaders, or just offer a helping hand to like-minded individuals.

Devoting their time and efforts to the community gives them a constant sense of personal fulfillment, a deeper feeling of inner contentment, and strong sense of their own identity. And all of this is backed up by strong patriotic sentiment. “[We] all hope that China can build quality cars on its own,” said Tian.

“Each Nio owner is a part-time salesperson, and that is the cornerstone for Nio to expand its business rapidly in the future,” Bill Lin, an EV enthusiast told TechNode. He said that the community is Nio’s most valuable asset. Anthony Lin, a Nio investor agreed, adding that rivals cannot come close to replicating the success in this aspect.

With that in mind, Nio is now raising the stakes. The cash-strapped EV maker has burned more than RMB 1 billion each quarter in the name of sales over the past two years. This includes fixed investments on brick and mortar clubhouses and expenses for marketing events. President Qin did not reveal the per capita cost of user acquisition, stating that building the community “has nothing to do” with the company’s financial plight.

“The company’s cash balance is not adequate to provide the required working capital and liquidity for continuous operation in the next 12 months,” Nio stated in its third-quarter earnings call, laying bare the grave challenges faced.

Analysts believe a lot of Nio fans may have overlooked the earnings report and fail to realize the significance of the stretched balance sheet. With new investment still far off, users are going to great lengths to help the firm navigate choppy waters and continue to push the NEV sector forward.