SHANGHAI (Reuters) – Chinese electric vehicle makers should brace for the possibility of protectionist policies being leveled against them by foreign governments as they seize on their cost advantages to expand exports, the founder of Chinese EV maker Nio said.

William Li told reporters on the sidelines of the Shanghai Autoshow that he estimated his firm and peers making EVs in China had as much as a 20% cost advantage over rivals such as Tesla thanks to China’s grip over the supply chain and raw materials.

Nio and Chinese rivals such as Xpeng and BYD have set their sights on winning more customers abroad, especially in Europe, as demand weakens in China. Renault, Tesla and BMW are among foreign brands making EVs in China and selling them abroad.

“After exports grow and grow, market protectionism will definitely happen. It is not a good thing for global sustainable development, but we must respect that every country has considerations for protecting local industries. This is the reality we must face,” he said.

Nio plans to launch new products tailored to European users, who he said were keen on compact cars. He added that they were also reviewing plans to enter the United States on a quarterly basis.

Reuters reported in February that Nio plans to build a factory to produce budget EVs under a new brand for export to Europe. Li declined to elaborate further on their European or U.S. plans.

Nio offers six models and plans to launch five more this year under its own brand. The Nio brand is positioned for the premium segment to compete with BMW, Mercedes and Audi.

(Reporting by Zhang Yan and Brenda Goh; Editing by Jan Harvey)

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