Group B - Amanda, Elea, Ilyane, Markus, George and Giovanni

Global Strategic Management

NIO Vs. TESLA (Porter's Diamond)

(SlideModel, 2023)

Introduction:
Porter's Diamond is a concept that can be used to assess the competitive advantage of
countries or enterprises operating inside such countries. It is made up of four major
components: factor conditions, demand circumstances, connected and supporting industries,
and firm strategy, structure, and competition. We'll compare Tesla, an American electric
vehicle (EV) maker, against NIO, a Chinese EV manufacturer, using these criteria.

Factor conditions:
Tesla: Because it is situated in the United States, Tesla has access to advanced
infrastructure, skilled personnel, and finance markets. To stay ahead of competition, the
organisation also makes use of local research institutions and technical breakthroughs.
However, the United States has faced issues in the supply of rare earth materials and
battery supply chains.

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NIO: NIO is based in China, which has a plethora of resources for EV manufacturing,
including lithium and other critical minerals for battery production. The Chinese government
also strongly supports the EV industry, offering a variety of incentives to both businesses and
consumers. However, in the expanding EV market, NIO confronts severe competition for
competent workers. Further, NIO just opened their first battery swap station in Europe (Min,
R. 2023).

Demand conditions
Tesla
Domestic Market: The United States' hunger for electric vehicles is expanding, fueled by
rising environmental awareness, concerns about climate change, and a desire for energy
independence. Federal and state incentives, such as tax credits, rebates, and access to
High Occupancy Vehicle (HOV) lanes for EV users, have boosted demand.

Customer Preferences: Tesla has a strong brand image, and its customers enjoy its
vehicles' cutting-edge technology, performance, and design. Autopilot and Full Self-Driving
capabilities from Tesla are particularly appealing to customers looking for advanced
driver-assistance technologies.

Pressure to Innovate: Tesla's market dominance in the United States has compelled
competitors to boost their game, putting pressure on Tesla to constantly innovate and
improve its product lineup. The increased popularity of EVs has also given buyers more
options, raising competition for Tesla.

Tesla is in high demand in the United States, thanks to rising environmental consciousness
and government incentives. In addition, to meet the increased demand for EVs, the company
has grown overseas, entering European and Asian markets (Lambert, 2023).

NIO
Domestic Market: China is the world's largest EV market, accounting for more than half of
total EV sales. The Chinese government has set ambitious targets for EV adoption,
providing large subsidies, tax exemptions, and other benefits to both producers and
consumers. Furthermore, the government is heavily investing in charging infrastructure,
which will make EV ownership more feasible and comfortable.

Customer Preferences: In China, NIO has established itself as a premium EV brand,

catering to rich consumers who value luxury, performance, and cutting-edge technology.

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Vehicles from the firm are noted for their sleek aesthetics, high-quality interiors, and
innovative features like the NIO Pilot driver-assistance system. NIO's distinct battery
swapping mechanism distinguishes it from competitors, allowing customers to swap out
drained batteries for fully charged ones in a few minutes.

Pressure to innovate: The Chinese EV market is very competitive, with multiple domestic
and international competitors fighting for market share. This fierce competition forces NIO to
constantly innovate, differentiate itself from competitors, and satisfy the changing needs of
its target clients. Partnerships with major automakers and technology businesses also help
NIO innovate and remain ahead of the competition.

Related and supporting industries:

Tesla:
Suppliers: Tesla has developed excellent partnerships with both domestic and foreign
suppliers. Suppliers such as Panasonic, LG Chem, and others supply the corporation with
various components such as batteries, power electronics, and electric motors. Tesla also
diversifies its supplier chain deliberately to reduce risks and boost bargaining leverage
(Maverick, 2019).

Vertical Integration: Tesla is well-known for its strong vertical integration. Many
components, like battery cells, powertrains, and chargers, are manufactured in-house by the
company's Gigafactories. This vertical integration gives Tesla greater control over its supply
chain, lowering costs and ensuring quality.

Infrastructure: Tesla has built a Supercharger network that now stretches across North
America, Europe, and parts of Asia. This large charging network alleviates range anxiety and
makes long-distance travel more accessible to Tesla owners, pushing the adoption of electric
vehicles even further.

Technology & R&D: Tesla works with universities and research organisations to have
access to cutting-edge technology and research. In addition, the corporation heavily invests
in R&D, which is critical for retaining its technological leadership in the electric car market.

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NIO:
Suppliers: NIO is based in China, a country with a sizable and established automotive
supplier chain. The business purchases components from regional vendors, which enables it
to enjoy less production costs, shorter lead times, and easier access to supplies. In order to
acquire cutting-edge automotive technologies, NIO also creates collaborations with
international vendors like Bosch and NVIDIA.

Infrastructure for Battery Swapping: NIO has created a special battery swapping system
that enables users to quickly swap out exhausted batteries for fully charged ones. This
solution makes EV ownership more convenient for NIO customers and lessens range
anxiety. The business has created a network of battery switching locations around China,
which also improves the nation's infrastructure for charging.

Partnership: To benefit from the production capabilities and industry knowledge of reputable
manufacturers like JAC Motors, NIO has developed strategic collaborations with them. In
order to gain access to cutting-edge technology and improve the connection and
autonomous driving capabilities of its vehicles, the company also works with tech behemoths
like Tencent and Baidu. The company has created partnerships with Chinese oil giants such
as CNOOC. This partnership is to support the growth and development of the EV market in
China. This partnership will spark “...the beginning of NIO's cooperation with CNOOC in
building battery swap stations in China, and NIO will further accelerate its cooperation with
CNOOC in laying out charging and switching facilities...” (Zhang, 2023).

Government support: The Chinese government's steadfast support of the EV sector has
sparked the growth of subsidiary businesses like battery manufacturing, charging
infrastructure, and renewable energy sources. Government assistance contributes to the
development of a hospitable environment for EV producers like NIO.

Firm strategy, structure, and rivalry:

Tesla: Tesla is noted for its innovative technologies, aggressive expansion plans, and unique
marketing techniques, and is led by Elon Musk. The company has a strong brand image and
a dedicated client base, which helps it maintain its market leadership in the electric vehicle
sector.

NIO: In China, NIO has established itself as a premium EV brand, focused on luxury and
high-performance vehicles. The company is also expanding globally, although it is still a long

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way from matching Tesla's global presence. NIO's strategy of building alliances with big
automakers and technology firms may help it acquire a competitive advantage.

Conclusion:
Finally, both Tesla and NIO operate in distinct circumstances, capitalizing on the distinct
advantages of their respective countries. While Tesla has a well-known brand and a global
presence, NIO benefits from the enormous Chinese EV market as well as government
assistance. To stay ahead in the rapidly increasing EV industry, both firms have employed
novel tactics, technology, and business models.

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References:

Lambert, F. (2023, January 17). Tesla (TSLA) is seeing “unprecedented demand,” stores
hitting new records. Electrek.
https://electrek.co/2023/01/17/tesla-tsla-unprecedented-demand-stores-hitting-new-records/

‌ averick, J. B. (2019, June 30). Who Are Tesla’s (TSLA) Main Suppliers? Investopedia.
M
https://www.investopedia.com/ask/answers/052815/who-are-teslas-tsla-main-suppliers.asp

Min, R. (2023, April 9). EV charging without the wait: Battery swap stations open in Europe.
Euronews.
https://www.euronews.com/next/2023/04/09/tired-of-waiting-ev-charging-stations-first-nio-bat
tery-swap-stations-open-in-europe

Zhang/CnEVPost, P. (2023) NIO partners with another oil giant in China to build swap
stations, CnEVPost. Available at:
https://cnevpost.com/2022/11/22/nio-partners-with-cnooc-to-build-swap-stations/