Tesla's Chinese rival Nio launches a new brand and car that undercuts the Model Y by $4,000

Chinese electric car company Nio launched its lower-cost brand Onvo on Wednesday, May 15, 2024, in Shanghai, China.CNBC | Evelyn Cheng

SHANGHAI — Chinese electric car company Nio revealed Wednesday that the first car for its new, lower-priced brand, Onvo, will be about $4,000 cheaper than Tesla's comparable Model Y.

Deliveries for Onvo's first car, the L60 SUV, are set to begin in September, the company said. Pre-sales began after Wednesday's launch event.

Nio CEO William Li said he expected that Onvo would sell its cars overseas at some point, but didn't specify when, according to an interview with CNBC's Eunice Yoon.

Since launching about 10 years ago, Nio has focused on the premium segment of cars, priced around 300,000 yuan (about $41,500) or higher. The company has since expanded to Europe, but its monthly deliveries in China have generally remained modest versus competition.

Onvo's L60 starts at 219,900 yuan ($30,439), versus the Model Y's 249,900 yuan. Elon Musk's electric SUV has been one of the best-selling pure battery-powered electric cars in China.

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Fierce competition in China's electric car market has invited new entrants and prompted many companies to cut prices.

Smartphone company Xiaomi in late March entered the electric car market with its SU7 sedan to rival Tesla's Model 3 with a price that was also about $4,000 cheaper.

The Model 3 has since cut its price by about $2,000 to 231,900 yuan, according to Tesla's China website. Xiaomi said Wednesday it had delivered 10,000 SU7 vehicles.

BYD, which sold more cars than Elon Musk's automaker last year when including hybrids, mostly sells cars in the range of 100,000 yuan or below. BYD has started to expand into higher-price segments in the last few years.

Nio CEO Li confirmed to CNBC the L60 is using lower-priced batteries from BYD.

Global competition from Chinese EV makers has also prompted stiff new tariffs from the Biden administration on imports of the vehicles to the U.S. Chinese EVs will be subject to a 100% tariff, the administration announced earlier this week.

When asked about the new levies, Li called them "completely unreasonable," noting the impact on consumers and climate goals. That's according to a CNBC translation of the Mandarin.

A 'new standard' family car to rival Tesla

Onvo aims to set a "new standard" for the family car, Alan Ai, president of the Nio sub-brand, said at Wednesday's launch event in Mandarin, translated by CNBC.

The brand's name stands for "On Voyage," while its Chinese name "Le Dao" is meant to evoke a family having a happy time together.

Ai made many comparisons to the Model Y and other cars during his presentation.

He claimed the L60's interior was more spacious than that of Tesla's Model Y and Toyota's Rav4. He also showed videos that claimed Onvo's new car had better shock absorption and cut tighter figure-eights than those of competitors.

Onvo's advertised driving range on a single charge is at least as far as — or even further — that of the Model Y depending on the version.

As a sub-brand, Onvo vehicles can access many of Nio's battery swap and charging stations, Ai said.

He also showed videos of Onvo models using driver-assist technology to navigate through country roads and city streets.

Tesla's driver assist software, Full Self Driving, isn't available in China yet but is widely expected to be nearing Beijing's approval for rollout.

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