NIO has created its own Model Y

After establishing its presence in the high-end market, NIO, under the banner of overturning Model Y, has launched the LeDao to carve out a place in the mass market.

On September 19th, the launch of LeDao's first new car, L60, is already in the countdown. On the eve of the launch event, LeDao's brand president, Ai Tiecheng, had a deep conversation with Wall Street News. In this dialogue, he detailed the background and ambitions of creating the LeDao L60, which is determined to overturn the current SUV king, Model Y, with monthly sales of forty to fifty thousand units.

"A product as powerful as LeDao L60 has not been seen in the market before," Ai Tiecheng pointed out. Currently, Model Y indeed dominates the mid-size SUV market, but a good product that is not updated for too long is also difficult to sustain.

Behind such "arrogance" is LeDao standing at a high starting point. NIO's president, Qin Lihong, once described this sub-brand growing within the NIO system as "born mature" - mature technology, energy replenishment system, and a handsome leader leading the team to charge into the mainstream market.

Ai Tiecheng frankly stated that after working in foreign companies for many years, he was impressed by the maturity of China's automotive and technology industries, attracting overseas renowned designers and engineers. In recent years, NIO's lavish investment in "long-termism" has emerged in such a "wealthy" resource environment. This further convinces Ai Tiecheng that "the next generation of the world's leading car model should be a Chinese brand".

Moreover, what is more important for LeDao is how to break through and gain a foothold in this market with huge imagination but severe homogenization through a set of unconventional strategies. The key figure for LeDao is Ai Tiecheng, who was poached by Li Bin from Disney five years ago.

Ai Tiecheng revealed that as early as 2014, when Li Bin was building cars, he began to think about entering the mainstream family market with a new brand. After stepping out of the ICU and surviving after 2019, NIO put the second brand on the agenda in 2020, and the predecessor of LeDao, the "Alps" project, was officially launched.

In Ai Tiecheng's eyes, what Li Bin valued was his user-centric thinking cultivated over many years at Procter & Gamble, WeWork, Disney, and other companies. "If you ask what Ai Tiecheng is good at, I think it's user insights, which is the foundation of my entire career."

After taking the helm, Ai Tiecheng and his team traveled to cities from first to fifth-tier across China. The conclusion drawn was that 85% of the Chinese passenger car market consists of family users. He outlined a basic profile for nearly tens of millions of family car owners - everyone is in a stage of upward mobility in life.

Therefore, Ai Tiecheng focused on safety, space, energy consumption, and other aspects around the family scene. If combined with rental electric BaaS services, the threshold for L60 can be directly reduced to the 150,000 yuan range. This is also the final barrier for joint venture gasoline cars.

With everything ready, LeDao has become the key for NIO to sprint for scale.

However, the followers of L60 are also coming in succession, with models such as FeiFan R7, ZEEKR LS6, Li Auto L6, Star Era ET joining the melee, and ZEEKR 7X, Avita 07, and Aito R7 set to be launched soon It can be foreseen that the 200,000-level SUV market will face a fierce battle next, and Leador's situation is not easy. Importantly, the L60's expected total sales within the first half of its debut are only 20,000 units, which seems incompatible with Leador's ambitions.

For Aito, the first battle of the Leador brand is crucial, how will he steer and tell the disruptive story of this SUV racetrack?

The following is a transcript of the conversation between Wall Street News and Aito, Senior Vice President of NIO and President of Leador Automotive (edited):

Question: What are the opportunities and considerations for NIO to develop mass-market brands?

Aito: Li Bin has been thinking about doing something since the early days. In 2014, when he just started his business, he began thinking about entering the mainstream family market with a brand new brand. Because NIO is only a high-end brand, but the global market for vehicles priced above $50,000 accounts for 15-18%, with a total market size of approximately over 10 million vehicles; the mass market ($30,000-$50,000) accounts for about 50%-60%, which is more than half.

China has changed too fast in the past two years. When I joined in 2021, I actually wanted to do the mainstream, Toyota, in the intelligent era. Because in the past era of gasoline vehicles, the best for mainstream family users were Volkswagen and Toyota. Why did I compare Tesla's Model Y with Rongfeng at the press conference on May 15th, this is completely consistent with our early thinking.

Question: Initially benchmarking Volkswagen and Toyota, but now targeting Model Y, what changes have occurred in Leador's positioning and understanding?

Aito: We found that in the era of gasoline vehicles, there were "bull cars" such as Toyota Rongfeng, Honda CRV, and Volkswagen Touareg for household use. Today, looking at the U.S. market, the European market, including Southeast Asia, these three cars are still very impressive.

But China has developed too fast, these cars are not smart in all aspects, so we quickly stopped looking at them, and later aimed at Tesla's Model Y. Li Bin said he wanted to be 10% cheaper than it and the product had to be better than it. At that time, we announced the Model Y that can be swapped with batteries, which netizens called "deluxe and larger battery-swappable Model Y", and we successfully achieved the positioning at that time.

Question: Model Y has been around for five years now, and there is still no car that can replace it. What confidence does Leador have in challenging it?

Aito: So far, indeed, Model Y has dominated the mid-size SUV market, with an average sales volume of nearly 40,000 units. Because it was the first to enter this market with advantages in space and energy consumption, coupled with Musk's halo, it is still strong in user awareness.

But a good product that is not updated for too long may be difficult to sustain. The automotive industry in China iterates too quickly, there may not have been products as strong as Leador L60 in the market in the past, with safety, comfort, large space, and low energy consumption all achieved. I think the next generation of the world's leading car model should be a Chinese brand.

In fact, I am thinking, why have Japanese and European brands not kept up with intelligence? China's technology companies, millions of software graduates every year, a strong talent base, and relatively developed internet companies are the fundamental reasons that enable China to lead the world Question: Tesla has now announced the roadmap for FSD's entry into China. Will this be a new killer feature?

Aito: I am also looking forward to its launch in China, but it will take time for them to truly drive like experienced drivers in urban areas. Domestic new forces in autonomous driving have already done very well. Leador is the only brand that can be used for nationwide highway navigation and urban navigation as soon as it is launched, which is also the result of NIO's overall empowerment.

Question: Previously, Toyota and Volkswagen empowered Porsche and Lexus. As we are moving from the luxury market to the mainstream market, how do we balance cost and product competitiveness?

Aito: L60 is very simple. The entire product is centered around safety, comfort, spaciousness, intelligence, and energy consumption, focusing on the core needs of mainstream family users. I often tell the team that we need to do well in staple foods and main dishes, focusing on the high-frequency needs of family users; we don't do low-frequency items. The product competitiveness of L60 fully demonstrates this.

In reality, technology is the driving force at the grassroots level. When I initially built the team, I found that Chinese talent is outstanding. Not only in terms of configuration, but also at the fundamental technological level, we are already leading the world. The motors we make are small in size, high in power, energy-saving, and space-saving. In addition, we have battery swapping, completely dispelling range anxiety.

Question: Many basic configurations of L60 are even higher than NIO's ES6 and ET5. Will there be user resource overlap between the two brands? How will Leador and NIO differentiate their brands?

Aito: From the reservation situation, less than 5% of users are within the NIO system, with the vast majority being new user groups. Many people ask why Leador doesn't carry the NIO brand, it's because we want differentiation. The NIO brand will lean more towards high-end business, while Leador is more focused on family users.

Our fundamentals are the same, but the more consumers can perceive the differences, the more they will be different. This depends on the positioning of the two brands and the different user groups. Like in the past, Mercedes-Benz and BMW had many business attributes, with a stronger emphasis on business in brand positioning and a weaker emphasis on family. You wouldn't buy a Mercedes-Benz C-Class and say why this car doesn't have the spaciousness of a Highlander and is more expensive than a Highlander.

In the long run, the true luxury is in technological flagship, it must be a technological pioneer, striving for ultimate innovation; Leador may not necessarily be the most innovative, and NIO can delegate some technology to it.

Question: It seems that there are fewer and fewer pure electric vehicles in the market. How do we think about this?

Aito: We don't make transitional products. Many people ask me, with such fierce competition now, why didn't Leador come out earlier? Because we want to make final products, this is very determined. The average usage period for family users is 7-10 years. No family user wants to buy a product that becomes outdated the next year, which is also a pain point for many family users. Whether it's in terms of driving trends or intelligence, we need to adopt the latest technology.

But why did we choose to launch in May and deliver by the end of September? Because I am a new brand, the consideration period for family users to buy a car is probably 3-6 months. From the initial demand to understanding and finally buying a car, we need to give everyone three to four months to consider and compare Question: Previously, it was mentioned that Aito aims to be ahead for 3-5 years. With the rapid development now, how can we ensure that we can truly stay ahead after 3-5 years?

Aito: The era of truly intelligent electric vehicles started with Tesla, and it has been ten years since then. We are predicting the time it takes to form the final product form. For example, in the case of the iPhone, the first three generations were experimental, and it was not until the iPhone 4 that it became the final product of a smartphone. Although we are now at iPhone 16, apart from the transition from 3G to 5G, there haven't been many significant changes. The updates are mostly incremental improvements.

In the context of electric vehicles, the voltage has increased from 400V to 800-900V, and further increasing the current is not sufficient. 900V is essentially an ultimate product; the intelligent architecture has also achieved convergence in four domains. This industry may have already reached a point where final products are emerging, and what we are doing is developing technologies that are close to the final product form. This trend should continue for the next 5 or even 10 years.

Question: Currently, Li Auto, XPeng are targeting the family market. As a latecomer, where does Aito's advantage lie?

Aito: It still comes back to the users, user insights are my strength. We have conducted extensive research on mainstream family cars globally, and one thing is very consistent - users in this price range are at a stage in life with upward goals, seeking a better life.

When families buy cars, it is usually during very happy moments such as promotions, getting into a relationship, or having a child, which are very joyful moments in life. Since we are targeting family users, can we add more joy to their lives? The brand image we have set for ourselves is warm, reliable, and sincere.

Assuming a market of 22 million users in China, with the market size of 800,000 in the 150-350,000 price range last year, it may reach 1 million by 2025, with 85% being family users. At this point, it will be about who can provide the best experience and lower costs.

Question: After Aito introduces the battery-as-a-service (BaaS), will it further disrupt the market in the 150,000 price range?

Aito: Yes, 80% of NIO users use the BaaS solution, and we predict that Aito's BaaS will be even higher. Among Aito's L60 subscribers, 39% have compared it to the Model Y, but very few have compared it to traditional fuel cars.

After introducing the battery rental service, Aito can target below 200,000, and in fact, Aito aims to break through the final fortress of joint venture cars - mid-size SUVs. In this aspect, Aito has an advantage over NIO. For example, the ES6 priced at 350,000, even with a rental fee of 280,000, there are hardly any fuel cars that can compete. Once Aito enters the 160-170,000 range, there are many fuel cars there, and even with the monthly electricity cost, it is much lower than the fuel cost.

Today, when someone buys a car for 160-170,000, they may not have done the math, and I need to help them understand. If you drive a Tiguan or RAV4, with 20,000 kilometers a year, the fuel cost is 9,000 yuan. Our product experience is several generations ahead of them, and with lower operating costs, including cheaper electricity and maintenance, why not give it a try?

For families buying a car for over 200,000, it is a significant investment for them, possibly the only car in the family. It needs to meet the needs of picking up children from school, commuting to work, and weekend family outings In the era of traditional gasoline cars, the value and strength of a product priced around 200,000 yuan are the strongest.

Returning to the basics, in the end, it all comes back to the fundamentals. We are also looking at how to explain to users that they are buying a better car that helps them save money. This is our biggest strategy.

Question: How many models does Aito currently plan to launch?

Aito: Currently, it's 3-4 models, like the top-selling models from Toyota in the past, such as RAV4 and Camry priced around 200,000 yuan, and another one is Highlander. Because families with more people need a large SUV, L60 is what we call a smart mid-size SUV for families, and the second SUV is a large three-row SUV, designed for multi-generational families with many children.

We focus only on creating explosive models, which are the most purchased by users.

Question: Currently, orders have exceeded management's expectations, but this year's production capacity is only 20,000 vehicles. NIO suffered losses before, has Aito considered this risk?

Aito: The law of climbing production is inevitable, and every company has to go through it. Starting with a few thousand in the first month, tens of thousands in the second month, and reaching 10,000 in the third month, it may be possible to reach the originally planned 20,000 units per month by the 4th-6th month. We are trying our best to increase production. In fact, starting from the first half of 2022, our team has departments dedicated to procurement, quality, etc., stationed at suppliers to start building the capacity to deliver 20,000 units per month.

Question: Aito's batteries support temperatures of 60 degrees and 85 degrees, while NIO's batteries support 70 degrees and 100 degrees. How do we solve the battery compatibility issue?

Aito: Technically, it has already been resolved. We have batteries from both NIO and Aito, with the third generation (21-cell capacity) and fourth generation (23-cell capacity) battery compartments being very large. Currently, they are not fully utilized, only about a dozen cells are being used.

We will prioritize battery deployment based on the usage around the battery swapping stations. If there are a large number of users around the swapping station, we may add more batteries there, roughly like this.

Question: What are the differences between Aito's expansion strategy and NIO's, and why choose to open half of the stores in automobile cities?

Aito: Basically, wherever Tesla and Li Auto are, you will find us, because they have already paved the way. In the 150,000-350,000 yuan range. It's best to have a clustering effect because users won't just look at one brand when buying a 200,000 yuan car; they usually compare three or four cars.

Question: What do you think has been the biggest challenge for you in the automotive industry in the past three years?

Aito: I have been focusing on brand building, but today there has been a significant shift in brand communication methods. We hope Aito is a warm, sincere, and reliable brand. How can we stick to our brand's core values and at the same time make others aware of our uniqueness is what I need to think about.

Question: Is it even more difficult to establish a new brand now?

Aito: I think we are doing fine. Our company already has traffic, but of course, my goals are very ambitious. I believe that as a new energy company, it takes time for others to understand you