The global green two-wheeled travel industry has attracted an increasing number of Chinese manufacturers to vie for a share of the market. NIU Technologies (小牛电动) is one of the top players, and also a pioneer in establishing a global strategy. Founded in 2014, NIU announced Germany as the first stop for its overseas expansion in 2016, making Europe the focus of its offshore business. In the following years, NIU established its networks in North America and Southeast Asia.
According to the 2022 financial report, NIU Technologies achieved a revenue of RMB 3.169 billion and sold over 830,000 vehicles globally. Over 120,000 vehicles were sold overseas, accounting for nearly 20% of the revenue and representing a year-on-year growth of 50%. NIU's sales network covers 50 countries with 42 dealerships. It is clear that NIU's global network has achieved significant results.
Taking the opportunity of the ESG 2023, EqualOcean invited NIU Technologies CEO Li Yan to conduct an in-depth interview on the company's product strategy, brand building, and global layout in overseas markets.
Product and Brand Strength Drive Overseas Expansion
When NIU Technologies entered the European market, the market environment was not optimistic. Before its entry, the German domestic electric motorcycle market was already filled with brands from Japan, Italy and other countries. Even BMW launched its C Evolution series of electric motorcycles in 2014.
However, none of these brands had made a breakthrough in product form and function. After all, the motorcycle market in Europe was too small, with a volume of only 1.5 million units per year for a population of 600 million. As EqualOcean previously mentioned in an article titled "Chinese E-bike Speeds into Europe: How Can Overseas Brands Challenge Local Industry Barriers?", under EU standards, electric motorcycles with speeds over 25km/h need to be certified, and users need to have a driver's license, wear a helmet, purchase insurance, and cannot ride on non-motorized vehicle lanes. This created natural barriers for local consumers. At the time, some German media noticed the arrival of NIU, but only cautiously mentioned that "China sells more than 20 million electric motorcycles each year, more than 10 times the sales volume of the entire Europe."
However, NIU Technologies CEO Li Yan did not see it that way. In his view, NIU Technologies's overseas expansion was not an opportunity, but a natural progression. Choosing Europe as the first stop for internationalization did not mean that they couldn't make money. For NIU, even if the market share is low, as long as they can take a small share, it represents a substantial business opportunity. He clearly stated that two-wheeled motorcycles are a global product, and electric motorcycles are not a category that can only survive in the Chinese market.
Many competitors such as Yadea (雅迪) and Aima (爱玛) entered the European market with relatively low product prices, and were labeled as "cost-effective" by the outside world. However, NIU persisted in pricing its products in the mid-to-high-end market. For example, the N1S urban electric motorcycle, priced at RMB 5,899 in China, was sold in Germany in 2017 for EUR 2,599, which was about RMB 20,000 according to the exchange rate at the time. This price exceeds the monthly salary of many German residents.
NIU in Overseas Exhibitions (Source: NIU Official Website)
Li Yan explained to EqualOcean that the lithium battery accounts for a large proportion of the total vehicle cost: "We chose the relatively more expensive intelligent lithium ion technology from the beginning. If we produce lead-acid battery products just to make money, it would go against environmental protection principles, and it would be difficult to do business for overseas expansion. From a user perspective, the lead-acid battery commonly used in mid-to-low-end products cannot meet the demand. Chinese consumers may only require a speed of 50km/h for an electric motorcycle, but European users who mainly use the vehicle for commuting want us to achieve a speed of 80 or even 100km/h, which cannot be achieved with lead-acid battery technology."
Matching the price is NIU Technologies's high-end and personalized brand positioning. Li Yan admits that NIU's products convey the concept of convenience, environmental protection, and individuality to the outside world. Therefore, high appearance and environmentally friendly lithium-ion batteries have become synonymous with the brand image of NIU in the minds of overseas users. He hopes that whether using electric motorcycles, E-bikes, or electric scooters, users can feel the fashion, individuality, freedom of passage, and technological intelligence inherent in the products.
Global Localization: Flexibility is the Key to Success
In recent years, many governments around the world have started to offer consumer incentives for electric two-wheelers in order to achieve their carbon reduction goals. Notably, in Southeast Asia, Thailand, Indonesia, and the Philippines have all introduced purchase subsidies and tariff reductions for electric motorcycles, coupled with a demographic dividend, which has attracted many electric vehicle brands to this growing market.
In Southeast Asia, motorcycles are the most basic means of transportation. Data shows that the six major countries in Southeast Asia (Indonesia, Vietnam, Thailand, the Philippines, Malaysia, and Singapore) sold 18 million motorcycles in 2019. Tianfeng Securities predicts that after domestic two-wheeler companies introduce cheaper electric bicycles to the Southeast Asian market, the market space could expand to two to three times the current annual motorcycle sales volume, reaching 30-50 million units. NIU Technologies chose Indonesia as its first stop to enter the Southeast Asian market in the fourth quarter of 2020. However, the 50% increase in overseas market revenue in 2022 did not satisfy Li Yan, as most of the revenue came from the US and Europe, and the seemingly large Southeast Asian market did not perform well in terms of sales volume.
Li Yan found that the majority of the 18 million motorcycle sales in Southeast Asia each year are still dominated by Japanese brands such as Honda, Yamaha, and Kawasaki. The electrification transformation of motorcycles did not progress as fast as expected. "Japanese motorcycles have done particularly well in localizing in Southeast Asia. The assembly supply chain of parts is all local, the cost has come down, and the price is very low. Honda's 125cc motorcycle can be sold for USD 1,200, and fuel is also cheap. Now that battery costs are high, our electric motorcycles cannot be sold at that price. USD 2,500-3,000 is normal," Li Yan said.
NIU's Factory (Source: NIU Official Website)
The strategies for the US and European markets are quite different. With higher consumer levels and user demands than other markets, NIU Technologies has made significant adjustments to its product line in Europe and the US. According to Li Yan's analysis, the difference between electric motorcycle products in Europe and the US mainly lies in usage scenarios. European target users are usually taller, living in apartments without garages, and have a small commuting radius (around 50km). Small towns have more cobblestone roads, which require higher demands for shock absorption, speed, and long endurance. On the other hand, American users usually have garages at home, and commuting is primarily done by car. Electric motorcycles are not as practical for family leisure riding activities.
Therefore, NIU Technologies has gradually increased the proportion of E-bikes and electric scooters in the US market, and designed larger footrests, wider handles, and larger tires (the N1S tire has been increased from 12 inches to 14 inches) for European vehicle owners. According to statistics, NIU has made more than 70 improvements to its designs in 2016 alone. This also conforms to Li Yan's belief that "globalization equals localization," which he emphasized multiple times.
In recent years, the E-bike track has been a hot spot for two-wheeler companies to pursue overseas expansion. Domestic models with mature supply chains and cost-effectiveness have achieved good results. However, when asked if NIU Technologies would consider it as an important category for future growth, Li Yan said that the brand characteristics of NIU are not suitable for investing a lot of energy into it, as it could potentially create a rift in user perception of the brand. "Our electric motorcycles are positioned relatively high. Currently, we and our competitors are each doing our own thing. If E-bikes and electric scooters compete by lowering prices, users will no longer recognize our brand. If we set prices too high, European local brands have already taken up that price segment."
Environmentally Friendly and Intelligence Demands Remain Unchanged
In the changing environment, NIU's rapid growth has encountered challenges. Despite its impressive performance in the overseas market in the first quarter of 2023, according to EqualOcean's analysis, there is still a large space for sales volume due to the rising price of single bicycles. Li Yan told EqualOcean that the skyrocketing upstream lithium-ion battery prices are the main factor. According to data from CBI China, due to factors such as raw material shortages, tight supply, and a surge in downstream demand, the price of lithium iron phosphate rose steadily in 2022, with a year-on-year explosive increase of 60%, and it had risen to RMB 168,000/ton by the end of the year.
Therefore, faced with enormous cost pressures, price hikes at the end of the supply chain have become Li Yan and NIU's choice. "The entry-level products are the most affected. The domestic cars that used to sell for around RMB 2,400 now have to be sold for around RMB 3,200-3,300 due to the rise in lithium batteries. Our customers in this part of the market mainly use commercial vehicles and are very sensitive to prices. In addition, retail sales were okay in the first quarter, but dealers knew that we were going to release new products in the second quarter, so they slowed down their ordering speed," Li Yan added. He also mentioned that service providers who do shared mobility in Europe and the United States are becoming more cautious about network deployment speed, which is also affecting channel sales, and the impact of price increases will continue into the second quarter of 2023.
External competition is also a major challenge. Bosch Electric Motors, Intelligent Lithium-ion, and high appearance are no longer NIU's unique selling points. Therefore, "differentiation" is a high-frequency term that Li Yan mentioned to EqualOcean. Especially in overseas markets, the differences in pricing in countries with different income levels, offline services based on stores and dealerships, the promotion of battery swapping models in Europe, the United States, and Southeast Asia, and the deep research on the pain points of regional users, are all efforts that NIU is making.
NIU's Overseas Store (Source: NIU Official Website)
From the perspective of market opportunities, Li Yan has high expectations for future growth, hoping that the United States and Europe can make greater breakthroughs in market share, and at the same time, cooperate with third-party service providers with better conditions to provide more comprehensive after-sales services. He also emphasized NIU's next important incremental market - Southeast Asia. Southeast Asia will usher in a policy of replacing oil with electricity. The Indonesian and Thai governments are already discussing the framework for subsidies for two-wheeled electric vehicles, which is an opportunity for NIU to increase investment in the future. "Last year we produced around four to five thousand electric motorcycles, and this year we can produce around ten thousand, which is a doubling. In the next three to five years, it is possible to have a volume of around one million," Li Yan said.