When it comes to EVs in America, Tesla currently dominates regarding how famous it is and how many cars it sells. With that being said, Tesla has been trying to make inroads into the Chinese auto market, but unfortunately, it hasn’t been smooth sailing. Here’s a look at why the Chinese EV automaker, Nio, is Tesla’s biggest challenge in China right now.

Tesla’s current situation in America

When it comes to the American EV market, Tesla is simply dominating. For example, in the first quarter of 2021, Tesla delivered over 180,000 units. Even on a car-by-car basis, Tesla’s EVs outsell the competition significantly. As such, Tesla’s stock values have been notoriously high. However, there’s no guarantee that this will last forever. After all, for the last few years, Tesla was practically the only EV automaker in America.

Nowadays, almost every automaker has announced plans to transition to EVs. Some have been quicker than others, too. For example, Ford has created the F-150 Lightning, an all-electric version of the F-150 pickup truck. Ford easily sells more F-150s every year than Tesla sells anything, so if the F-150 Lightning is successful, then Tesla will have some real competition in America.

A look at the Chinese company Nio

Tesla already has some real competition in China. Unlike Tesla’s competitors in the U.S., Nio is an established EV automaker that sells quite a few cars. Not only that, but Nio’s EVs are different from Tesla, as they have battery swap technology. It’s a pretty simple concept, as it simply allows Nio EVs to swap out batteries instead of recharging them from scratch. 

In fact, that battery swap tech may be what allows Nio to beat Tesla in the future. According to CNBC, while Nio fell into some financial troubles before the pandemic, the Chinese government stepped in and helped out. One of the things China’s doing to help Nio out is allowing automakers to start selling cars without batteries. This would be a bad idea for many automakers, but it’s perfect for Nio, thanks to that battery swap tech.

This will allow Nio to slash $10,000 off the purchase price of its cars. According to CNBC, customers would then have to subscribe to Nio’s “battery-as-a-service” program, which costs about $140 a month. This ultimately means that Nio’s cars can be significantly cheaper than Tesla’s, which makes them very compelling to the average Chinese citizen. 

Overall, Nio sold about 10,000 cars in the second quarter of 2021, and it expects to sell about the same number in the third quarter. That number is smaller than the number of cars that Tesla sells in China. Still, it’s not as big of a gap compared to other automakers in the U.S. As such, Nio is currently focusing on the Chinese market, though it plans to expand globally in 2023 and 2024, according to CNBC.

Tesla’s plans for the future

Nio’s battery swap technology gives it an advantage in China, but not necessarily anywhere else right now. Regardless, Tesla has plans to compete with Nio, and that’s simply by building a cheaper car. That’s a reasonable strategy as Nio’s cars are pretty expensive before any subsidies are added on. 

As such, Tesla plans on building a car that will cost below $25,000. It’s not clear what that cheap Tesla would look like in terms of its specs, but the price is probably the most important metric of all. If Tesla can bring that affordable EV to other markets, then Tesla may continue to stay dominant in the future.