Innovation and China's NEV Revolution

Tech led innovation is a key driver of brand value growth in the NEV electric age.
Chinese NEV Brands Head pic
lynn zhang

Managing Director, Innovation & Customer Experience Practice, Insights China

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*As we approach the year’s end, Kantar China will publish a series of Thoughts Leadership articles from The Kantar BrandZ™ Top 100 Most Valuable Chinese Brands 2021 report. We sincerely hope by sharing these insightful articles, we can help clients to build stronger brands in 2022. This article is based on the 'Innovation in automation' in page 56-57 of the report with editing.

2021 Kantar BrandZ™Top 100 Most Valuable Chinese Brands report showed that the Cars category grewa mammoth 480% year on year, as returning brand BYD grew by 154% and New Energy Vehicle (NEV) brand NIO joined the China Top 100 for the first time. Looking forwards, it may not be long before a Chinese New Energy Vehicles (NEV) start-up joins the ranks of the world’s valuable and fastest-growing brands. This year, around 10% of new car sales in China are expected to be NEVs, and the market is likely to grow at 40% per annum for the next few years.

Today, NEVs account for some 6 percent of the Chinese auto market. But with new emissions and sustainability guidance from the Chinese government, the industry-wide goal is for that number to reach 20 percent by 2025 and 50 percent by 2035.

Market competition in China is already fierce. Chinese NEV startups like NIO, XPeng, and Li Auto are jostling for space with traditional automakers who are eager to electrify, such as BYD, SAIC Motors, Geely, BMW, and Mercedes-Benz. Tech giants like Xiaomi and Baidu have also joined the electric vehicle race.

Tech led innovation is a key driver of brand value growth in the NEV electric age. Innovation is a key source of differentiation and meaningfully relevant benefits, not to mention the ‘coolfactor’ that drives distinctiveness. In the pre NEV age, consumer expectationsfor speedy innovation in the auto industry were low. If there indeed was latent consumer demand for agile innovations and upgrades, the traditional manufacturers, with their long innovation and product development cycles, were not able to respond to these consumer desires.

At first, the main task of NEV brands was to assuage consumer’s concerns on basics like range anxiety and insufficient charging facilities. Now that these fundamentals are being taken care of, NEVs are increasingly having to compete on how fast they can upgrade their hardware, and software led features and benefits. Hence, in the NEV age, cars areinnovating almost as fast as Fast Moving Consumer Goods (FMCG) or household appliancebrands.
Compared to the rest of the world, Chinese consumers are more heavily influenced by smart and advanced technology. Technologies that are not always offered in other markets, such as advanced facial recognition systems, kick in as soon as one enters a Chinese NEV. These adjust the seat, steering wheel, and interior lighting to the individual’s preferred settings. A friendly Artificial Intelligence (AI) avatar on the dashboard follows up with targeted restaurant and music recommendations.

User experience is paramount. The idea is topack in AI features that make driving easy and fun, especially for first-time drivers who might have never experienced a conventional vehicle. The interioris increasingly seen as a ’cabin’, with infotainment systems adding to the NEV’s differentiation from conventional cars.

Local players have found new ways to leverage AIand big data to provide extra value. NIO built NOMI, the world’s firstin-vehicle AI digital assistant. NOMI elevates passenger experience through understanding and adapting to consumer preferences and external information,such as passenger daily routines, travel patterns and current weather. Through this, NIO assimilates into its users’ lifestyle and builds meaningful difference with them. 
BYD also collaborated with Didi to launch D1, the world’s first customised ride-hailing vehicle. This represents a shift towards the vertical integration of multiple products into a purposeful lifestyle platform, to provide consumers the convenience of an end-to-endexperience.
XPENG, meanwhile, is incorporating new autonomous driving and smart cockpit features into its Over-The-Air software updates – a new kind of “tuneup” that represents the new frontier ofcar servicing. And BYD has become a major player in not only manufacturing its own conventional and electric vehicles, but also in partnering with tech brands such as Xiaomi to supply parts and platforms for their own NEV manufacturing needs.

Connectivity features are especially important to consumers in China, with gesture control, voice assistance, and emotion recognition tools playing an important role in defining the driving experience. These tech-led features thus offer the prospect of upending the traditional patterns of brand choice in the automotive industry. 

Innovation Top 33 brands
Kantar’s recent luxury electrical vehicle (EV) study reveals that traditionalmanufacturers are seen as having high quality interior craftsmanship anddesigning break through exteriors. However, relative to NEV focused start-ups, the traditional luxury manufacturers were seen as lacking capability and experience in software development, autonomous driving technology innovation, and advanced connectivity solutions offerings. Consumers believed that most EVinnovation comes from ‘young or rising’ car companies, or big high-techplayers. This poses a dilemma for manufacturers like Mercedes-Benz, Porsche, and BMW. Going forward, they will need to highlight their innovative tech and service features without losing their distinctive luxury positioning.

Chinese NEV’s strategies, in particular, revolves around selling many car features via a subscription model. For example, the company launched a ‘battery as a service’ plan that bills customers a monthly fee for battery power recharging regularly.


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