Nio's ONVO brand offers an affordable alternative for families

Nio unveiled volume car brand ONVO last week, becoming the first Chinese electric vehicle startup to start a multibrand strategy which will, among other things, improve its financial performance.

Positioned lower than the carmaker's namesake Nio, which rivals BMW and Mercedes-Benz, the new brand focuses on family cars, highlighting practicality and value for money.

"If you look at the mainstream segment, almost 90 percent of car buyers buy family cars," said ONVO President Allan Ai, who was a Disney executive.

Nio's third brand is expected to follow a year from now. William Li, founder and CEO of Nio, said the brands will increase the company's sales and improve its profit while making better use of plants and technology.

"For instance, our smart driving functions can be shared. Also a rise in volume of new cars will get us a better bargain from suppliers," said Li.

ONVO vehicles will share production lines with Nio's models. The company saw its 500,000th Niobranded vehicle roll off the assembly line at one of its plants in Hefei, Anhui province, earlier in May.

The new marque's first model, the L60, made its debut last week and is scheduled to hit the market in September. The SUV will take on Tesla's Model Y, the best-selling EV in the world, said Li.

The L60 has larger dimensions, lower power consumption and a starting presales price 30,000 yuan ($4,151) lower than the Tesla Model Y. It has three battery options, enabling the vehicle to run 555 to 1,000 kilometers on one charge.

Like Nio-branded models, ONVO vehicles can get their batteries swapped. This technology is another big selling point, as it is much faster than charging and relieves car owners' worries about the battery pack's life.

In addition, Li said ONVO will have at least 100 dealerships when its first model hits the market, the most for any new marque when launched.

Some other startups including Xpeng are to launch new marques as well. Li said Nio decided on the multibrand strategy when it was established in late 2014.

"It is not practical to realize economy of scale if you focus merely on the premium vehicle segment, which stands at three to four million vehicles a year," said Li.

He explained that the company's decision to start with the premium segment was because established rivals were slow in terms of electrification and did not expect startups to survive.

"There will emerge opportunities if people think you will not make it," said Li, adding that Nio is a top choice for many BMW and Mercedes-Benz owners when they buy EVs.

He went on to say that building a premium brand will make the company more innovative.

"Selling vehicles at high prices allows you to develop the best technology and choose the best suppliers," and the technological achievements can be shared with sibling brands, he said.

There are concerns that potential Nio buyers may choose ONVO vehicles instead as they have something in common especially in terms of technology.

Li admitted that there might be some such cases, but the number will not be big, as the brands are positioned differently. "If Lexus does not sell well, it is not because people choose Toyota," he said.

Instead, he said having several brands will create an atmosphere of competition within the company, which he believes will be beneficial.