China's response to Tesla is about to become public

A Chinese start-up that wants to compete with Tesla is about to become public in New York. But the young company has a long way to go to catch Elon Musk.

Like other top Chinese companies that have recently made their IPOs, Nio (NIO) had to reduce its ambitions for its IPO.

He raised $ 1 billion from the supply, well below A target of $ 1.8 billion set by Nio.

The stock was priced at $ 6.26 a share, just a penny above the bottom of the range that Nio was hoping to reach. The IPO has valued the company at $ 6.4 billion.

The company, founded only four years ago, is trying to take charge You're here (TSLA) in China, the largest electric vehicle market in the world.

Its ES8 electric SUV, unveiled last year, sells for about $ 65,000, about half the price of the most basic version of Tesla's X model in China.

"They have the advantage of the first engine," said Tu Le, founder of the consulting firm Sino Auto Insights. "This is the first Chinese company that wants to be the killer of Tesla."

It's easier said than done in the already crowded Chinese market.

In addition to Tesla, Nio faces competition from Chinese manufacturers, including Warren Buffett. BYD (BYDDF) and Byton. Global manufacturers including Volkswagen (VLKAF) and Ford (F) are also putting in place plans to develop electric cars specifically for the Chinese market.

Nio intends to "compete with Tesla at a slightly more affordable price," said Bill Russo, founder of the Shanghai-based Automobility consulting firm. He is looking to attract young drivers with features such as Internet connectivity and artificial intelligence, he added.

Nio has rich backers, including Chinese technology companies Tencent (TCEHY) and Baidu (BIDU)but its operations are still small scale.

By the end of July, it had ordered 17,000 vehicles from its customers, but had delivered less than 500, according to a regulatory filing for its IPO.

In the first half of this year, sales reached only $ 7 million, a loss of $ 503 million.

By comparison, Tesla already has annual sales of around $ 2 billion in China, even though its US-made vehicles are subject to high import duties. The Musk company aims to build a plant in Shanghai, which will eventually manufacture 500,000 vehicles a year.

Nio, meanwhile, could have a hard time standing out.

"If you look at the car, it's no different than any other vehicle currently," said Mr. Le, referring to the ES8.

Nio's business model could also be a disadvantage. Rather than manufacturing its own vehicles, it outsources manufacturing to an established Chinese automobile company, Anhui Jianghui Automobile Group (JAC).

Nio is focusing on the development of technologies such as an embedded artificial intelligence system and a charging system that he says will allow drivers to change the batteries in their car in just three minutes.

The company's lack of direct control over vehicle manufacturing makes it more difficult to maintain quality and respond to changes in consumer tastes, according to Le. The company is not able to obtain a license to open its own plant because it does not sell enough vehicles yet, he said.

Nio's senior executives, however, have great ambitions. President Lihong Qin told CNN in December that he wanted to "target the middle class in major cities in China", predicting that this market would double in size in the next few years.

Nio also wants to increase sales beyond China, including the United States. It already has offices around the world, including California, London and Munich.

CNNMoney (Hong Kong) First published on September 12, 2018: 5:41 am ET