BEIJING, November 8 (TMTPost)— Chinese electric vehicle maker Nio Inc. has changed its strategy to foray into the Unites States.

Credit：Visual China

Nio will not seek entering the U.S. market by producing EVs locally, instead, it will import premium EVs in China, Ganesh Iyer, the CEO of Nio in U.S., said as he revealed the expansion strategy of his company in the country. Nio aims to expand its business into a total of 25 countries and regions across the world, including in the United States, by 2025, Iyer said at the NextChina Conference, an annual Chinese business and thought leadership event hosted by the China Project news outlet in New York.

Nio used to consider making vehicles in U.S. and even weighed site selection of its possible plant in three states, but it finally chose not to set up the plant due to the high cost, according to Iyer. “We have a lot of dedicated local suppliers in China who don’t do business in the U.S. If I were to build a factory in the U.S., I would need to find the right location where there would be many other suppliers that I could tap into, and I would also want to bring in some of our existing suppliers because they are strategic and special to Nio, which is the main reason,” the executive explained why his company scrapped plans to making EVs in U.S.

The Inflation Reduction Act (IRA) introduced in August 2022 provides up to $7,500 in tax incentives for purchase of EVs but impose new conditions on these credits. The law requires 50% of the value of battery components to be produced or assembled in North America to qualify for a $3,750 credit and 40% of the value of critical minerals sourced from the United States or a free trade partner also for a $3,750 credit. Nio’s premium vehicles are too expensive to qualify any tax credit anyway, Iyer noted.

“Since one will not axe prices just for the sake of lowering prices, under current IRA requirements, our vehicles do not qualify for incentives from a strict price perspective," Iyer said, adding that Nio requires time and capital to adapt to the U.S. market as the EV demand there is different from those in China and Europe. When asked about whether Nio will definitely enter American market, Iyer said that is the plan the EV maker announced two year earlier “but things are changing.”

Iyer’s remark about cost of production in U.S. came as Nio confirmed a massive layoff this month, highlighting the company’s pressure of cost reduction. Nio will lay off 10% of employees and the related personal adjustments will complete this month, the Chairman and CEO William Li, or Li Bin, said in a letter to staff last Friday. The coming two years will be the most competitive period during an ongoing transition of the auto industry, and the broader environment is filled with elevated uncertainties, Li noted at the beginning of the letter.

In the past two weeks, Nio has drawn up specific plans for organizational and business optimization, including to ensure long-term investments in core technologies and maintain leadership in technology and products, to make sure adaption of the sales and service teams to the fierce competition, and to keep nine core offerings under three brands well on the track to launch as scheduled, Li told employees in the letter.