has dramatically restructured its BaaS battery rental option in an attempt to make its cars more attractive in the face of fierce price competition, though emphasizing that it's not a response to the ongoing price war.

(Nio founder, chairman, and CEO William Li (right), and co-founder, and president Qin Lihong speaking with the media on March 14, 2024 in Beijing. Image credit: CnEVPost)

Nio (NYSE: NIO) has dramatically revamped one of the key car-buying options it offers in an attempt to make its vehicles more attractive in the face of stiff price competition, though it emphasized that it's not a response to the ongoing price war.

The electric vehicle (EV) maker announced at today's launch of its long-life battery strategy that it has restructured its BaaS (battery as a service) battery rental service, lowering the cost of monthly rentals while also cutting down on one of the major barriers that had previously prevented potential customers from choosing the service.

Nio has been offering two ways for vehicle purchases, with customers able to buy a complete vehicle including a battery pack as they would any other EVs, or they can buy just the body and rent the battery, the latter known as the BaaS program.

The company launched the BaaS service in August 2020, lowering the threshold for purchasing a Nio vehicle by at least RMB 70,000 ($9,740).

Nio formed Mirattery, a battery asset company, with several partners, including , when it announced the BaaS service.

Under the previous pricing system, customers who chose to use the BaaS service to purchase a car would have to pay RMB 980 per month for a 70/75-kWh standard range battery pack. For the 100-kWh long range battery pack it was RMB 1,680.

Until this year, Nio didn't allow owners who opted for the BaaS model to buy out the batteries, and it was only on January 1 that the company announced that the battery buyout option became available to BaaS users.

The battery buyout for BaaS owners costs RMB 70,000 for the standard range battery pack and RMB 128,000 for the long range battery pack.

It's important to note that battery rental fees that owners have previously paid for can't be used to offset the cost of the battery buyout.

For example, a five-year BaaS customer would still need to pay RMB 70,000 for a standard range battery pack, even though he had already paid RMB 58,800 in battery rental fees.

This means that the longer the owner uses the car, the less cost-effective it is to buy out the battery if he initially chooses BaaS. That's been a key barrier to widespread acceptance of the service, and has put a damper on Nio's efforts to bring down the car-buying barrier with the service.

In upgrades announced today, Nio has lowered the monthly cost of the BaaS service and significantly reduced the cost of re-owning the battery for car owners who opted for the service.

Here are the key details of the latest changes to the BaaS service, all of which come into effect today.

1. Monthly fee reduction

Customers who choose to purchase a Nio model with a standard range battery pack based on the BaaS model can reduce their initial purchase expenditure by RMB 70,000, the same as before.

The latest monthly rental fee for the standard battery pack is RMB 728, a decrease of RMB 252, or 25.71 percent, from the previous fee of RMB 980.

If a customer chooses to purchase a Nio model with a long-range pack based on the BaaS model, the initial purchase expense is reduced by RMB 128,000, the same as before.

The latest monthly fee for the long-range battery pack is RMB 1,128 per month, a reduction of RMB 552, or 32.86 percent, from the previous fee of RMB 1,680.

2. Exclusive benefits for BaaS users

BaaS users will receive a RMB 100 discount coupon for every payment of the battery rental bill. The user can use these discount coupons when he/she next purchases a Nio model, which is valid for 5 years and is not transferable.

Previous BaaS users will also be able to get the discount coupon. As of March 14, if a user has paid M periods of BaaS bills, then they can get M*100 yuan worth of discount coupons.

3. Battery buyout policy

Considering the new vehicle purchase tax policy in China, vehicles with purchase invoice date on or after January 1, 2024, need to reach 1 year before they can buy out the battery.

For vehicles with purchase invoice date before January 1, 2024, owners can buy out the battery within 1 year.

In the first year of the vehicle's purchase, the cost of buying out the battery is the amount that the BaaS program helped reduce at the time of purchase, which is RMB 70,000 for a standard range battery pack and RMB 128,000 for a long-range battery pack. This is the same as before.

From year 2 to year 5, for the standard range battery pack, for every 1 payment of the bill that the owner pays, he/she pays RMB 460 less at the time of buying out the battery. For long range battery packs, it is RMB 820.

Battery buyout cost = Amount reduced when purchasing a car under the BaaS program - deductible amount.

Starting from year 6, the battery buyout cost is the same as the buyout price at the end of the fifth year.

For those who have already bought out the battery before this policy change, Nio will issue a discount voucher equal to the deductible amount calculated as per the new policy. The voucher will be valid for 5 years and is not transferable.

An example: If a user who rents a standard range battery pack buys out his battery in March 2024 and he has previously made 5 payments on his BaaS bill, which is less than 12, and therefore will not receive a voucher.

If he previously paid 15 BaaS bills, he/she can receive a one-time discount voucher in the amount of (15-12)*460=RMB 1,380.

4. Limited-time BaaS benefits

Customers who order Nio vehicles between March 14 and May 31 and choose the BaaS plan to purchase a vehicle can enjoy a limited-time purchase discount:

For every 4 payments of BaaS bill made, the next payment will be free. This is only available for the first owner and a maximum of 12 payments can be waived for one vehicle.

Customers will be given 60 vouchers for free battery swaps for a period of 5 years after taking delivery.

The Nio management, while talking to the media today, emphasized that the price cuts and tweaks in the BaaS service are not due to the ongoing EV price war, but they acknowledged that it helps in making the BaaS plan more attractive.

The company was considering tweaking its BaaS services before the latest round of price war, but it was a complex issue as it involved Mirattery as well as many other stakeholders.

The EV industry in China is highly competitive, and for potential customers, it's cost-effective for them to go with a BaaS service now, William Li, Nio's founder, chairman and CEO, said in a communication with media, including CnEVPost, in Beijing today.

The company's co-founder and president, Qin Lihong, said that while Nio didn't cut prices, the tweaks to BaaS are a more than price-cutting move, amounting to an 8-year, interest-free loan on battery packs for customers.

($1 = RMB 7.1893)

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