China's top electric car startup is using Apple's playbook in China to take on Tesla
- NIO is a Chinese electric car startup that is trying to take on Tesla using the same method that Apple used to dominate the smartphone market with iPhones.
- Founder William Li is focusing on building an ecosystem of products and services beyond just the car that make it harder for consumers to switch brands and lock people into using the company.
- NIO said it is applying a tech philosophy to the auto industry focusing on the user experience rather than simply the product.
Chinese electric car startup NIO thinks it can take on Tesla and the auto industry by using similar strategies that Apple used to dominate the market share for smartphones.
While many consumers think of Apple's hardware and technology as its key differentiating factor, NIO founder William Li said that Apple's dominance comes down to its high-end user experience, its ecosystem, and its account management system.
"I use the iPhone today because I started using an iPhone ten years ago. Apple has all my information," Li told Business Insider during a recent interview at the 2018 Beijing Auto Show. "It's a little bit difficult to transfer your account information from an iPhone to an Android phone."
Other companies, particularly in China, can compete with Apple on hardware and price, Li said, pointing to Xiaomi smartphones, which typically have the same high-end features as iPhones and are priced lower. But Apple continues to do well in China, he said, because users are used to the experience and are "locked in" to the ecosystem, which manages their contacts, app data, photos, messages, as well as apps that are exclusive to the iPhone.
NIO is applying similar concepts to the auto industry.
"If you look at Mercedes or Porsche, those companies cannot keep their users with the brand. But NIO is more like Apple. It has an account system," he said. "In the future, users will want to stay with NIO because it is difficult to transfer their account to other brands."
In December, NIO launched its first production car, the ES8, a seven-seat electric SUV with 220 miles of range. The company plans to bring a self-driving electric car to the US by 2020.
The Chinese startup, which also has a US division based in San Jose, raised over $1 billion in funding in November from notable names like Tencent Holdings, Baidu, Sequoia Capital, and Lenovo. The company plans to go public later this year on the New York Stock Exchange with a goal ofraising $2 billion for an expected valuation of $15 billion.
NIO wants to build an ecosystem its users won't want to leave
NIO's ecosystem is not just about the car, but the array of products and services that are attached to the car.
NIO's cars include autonomous driving capabilities, an Alexa-like AI assistant called NOMI, NIO Power, its three-minute battery-swapping service, and its NIO app, which allows users to chat with company execs, attend events, or arrange car service and charging.
The company's eventual goal, according to US CEO Padmasree Warrior, is to develop a "living space that moves you." The idea is: if the car can drive itself, you should be able to do everything from sleep, watch movies, and take conference calls within a comfortable and high-tech ecosystem.
Other car companies are similarly seeing the future of cars as an extension of the home. Ford has connected Amazon's Alexa to its new vehicles and BMW has built concept cars with reclining seats and flat-screen TVs.
But, according to Izzy Zhu, vice president of user development at NIO, it's not just about building a different type of car, but about a different type of company.
"If you look at other companies and other industries - like Starbucks or Airbnb - they all think about user experience rather than the product itself," Zhu told Business Insider.
"If we believe the car itself is a user touchpoint - one of many touchpoints a company can provide with its users - I think the mobile internet would be the applicable business model in the auto industry."
Li said that traditional car companies rarely connect directly with customers because the only touchpoint is the dealership, which they don't control directly.
Like Tesla, NIO sells directly to consumers. But NIO sees the relationship with consumers being persistent, long after the sale is over. Zhu pointed to the company's NIO Houses, which act as a kind of clubhouse for NIO owners that is a cross between a co-working space, a daycare center, a cafe, and a space for exclusive events. In addition, the company's cars and app provide additional ways for the company to connect with users and generate data and feedback about what customers want or need.
"With the development of the social and mobile internet, the brand in the future will not be defined by a single product or service. It will be defined by the user base," Li said.
Li is not the only one at Nio making a comparison to Apple. Warrior told Business Insider in 2017 that " if you think of some of my lessons learned in the cell-phone industry, it took an Apple to come and create something like a smartphone."
"It was not the existing manufacturers of cell phones who had been around for 75, 8o years as market leaders," Warrior said while reflecting on Nio's potential to disrupt the automobile market. "I think this change will require a newcomer to fundamentally design the vehicle differently, engineer the vehicle differently."