Why some Chinese buy local electric car brands Nio, Xpeng and not Tesla

BEIJING – Chinese consumers considering whether to buy electric cars from Tesla or local alternatives have two things on their mind: price and range.

That’s according to anecdotes collected from CNBC – conversations around the country that don’t represent qualitative research. But the comments shed light on what some consumers care about in China, the world’s largest auto market.

US-listed Chinese auto startups Nio, Xpeng and Li Auto saw deliveries up last year despite a slump in the general auto market and the coronavirus pandemic. Shares of the companies soared in 2020, but declined slightly this year.

To be clear, Tesla is still the market leader for high-quality electric vehicles in China. During a quick check at the start of the commute one day, CNBC found 11 Tesla cars passing, along with two Nio SUVs, one from WM Motor and Xpeng’s latest P7 sedan.

This is what some Chinese consumers say has been factored into their decision to buy a local electric car.

First, price was an important consideration.

Chen Yingjie, 42, said he bought Li Auto’s Li One SUV in April 2020 for about 300,000 yuan ($ 46,000) after realizing it would cost him about twice as much to buy a comparable car from Nio with all specifications he wanted.

Nio’s starting price is low, but there are many features that come at an additional cost, Chen said. The Shanghai resident had purchased the G3 from Xpeng earlier in 2019 and a BYD electric car for his father later in June 2020.

Part of Nio’s strategy is to sell many car functions through a subscription model. For example, last year the company launched a “battery as a service” plan that charges customers a monthly charge for battery power, comparable to a normal fuel price for a traditional gas-powered car.

For Wang Jingyan, 29, he said that Nio’s emphasis on customer service was something he thought was worth paying extra for because it saved him time to go to a repair shop.

Price was also a factor for him. Wang said he bought his Nio ES6 for around 450,000 yuan – his first electric car – in late 2019 after a recommendation from a manager at work and a comparison with a more expensive Lexus RX.

He said he hadn’t had a chance to try out Tesla’s Model 3 beforehand, but he didn’t have such a good impression based on his friends’ experiences and online stories of poor customer service in stores.

How far the car could travel on a single charge was another important factor for Chinese consumers.

Zhang Zhen, 41, lives in a cold part of northern China and was concerned about an electric car’s ability to have enough power to drive a car while heating the vehicle. So his family bought a Li One last fall, which comes with a fuel tank to recharge the battery.

That fuel increases Li One’s driving range from 180 kilometers (111 miles) to 800 kilometers (497 miles) on a single charge.

Zhang said his wife mainly uses the car to send and pick up their children from school, a daily distance of about 10 kilometers (6.2 miles). The kids also prefer his wife’s car to his non-electric car because they can watch cartoons on the car’s built-in interior screen, Zhang said.

But he found repairs more of a hassle than for a non-electric car, saying he wouldn’t consider buying another such vehicle in China’s northeast region due to the lack of public charging infrastructure there.

To support the local development of electric vehicles, the Chinese government has launched subsidy programs and emphasized the construction of a nationwide charging network.

But compared to the US, most cars in China don’t have fixed parking spaces, making it difficult for many drivers to have regular access to battery charging stations, said Mingming Huang, founder of Future Capital Discovery Fund, an investor in Li Auto.

Therefore, he expects that range expansion systems such as the start-up offerings could be the best option for China in the next five to ten years. Li Auto’s Li One SUV comes with a fuel tank to recharge the battery on the go.

Finally, many Chinese drivers opt for electric cars because of favorable government policies, such as programs that make it much faster and cheaper to get license plates for the electric vehicles. Due to efforts to reduce congestion and pollution in the Chinese cityslocals often have to wait years to buy expensive fuel car license plates.

After waiting nearly a year in Hangzhou city for a license plate on a fuel car, a 27-year-old, asking for anonymity, decided not to wait any longer after seeing an Xpeng G3 electric car on a trip to a shopping center. The car was within her budget of about 180,000 yuan, after government subsidies, she said.

On the streets of Beijing, where license plates are also hard to get, the more expensive electric car maker Tesla is still a popular choice.