NIO, the Chinese Electric-Vehicle Startup, Unveils New ET7 Sedan

“In 2021, we will strive to live up to the expectation and keep moving forward,” Mr. Li said at the launch.

Mr. Li also debuted several new technologies, including a more powerful 150 kilowatt-hour battery pack—an improvement on the 100 kWh battery pack the company launched in November—which will give NIO’s vehicles a claimed range of more than 621 miles.

By comparison, Tesla’s Model 3 has a claimed range of 263 miles for the standard version, and 353 miles for the long-range version.

Mr. Li also introduced an upgraded battery-swap system capable of switching the car’s battery more quickly than the existing system, and with three times the capacity of the older system, with 15 stored batteries enabling up to 312 swaps a day.

NIO has championed battery swapping as a speedy alternative to recharging. Mr. Li said the company would have 500 battery-swap stations in operation by the end of 2021, up from 177 stations now.

Having flirted with bankruptcy before securing a financial lifeline from the Chinese authorities in April, seven-year-old NIO hit its stride in the second half of 2020. A surge in the value of its New York-listed shares—which are worth roughly 14 times more than they were a year ago—has made NIO the world’s fifth most-valuable auto maker, ahead of industry stalwarts such as Daimler AG DMLRY 0.17% and General Motors Co. GM -0.60%

Record sales in December completed a fourth quarter in which NIO sold 17,353 vehicles, almost as many as it managed in all of 2019.

Two rival Chinese EV startups that listed in the U.S. last year are also building momentum. Li Auto Inc. LI -2.25% sold 14,464 vehicles in the December quarter, while XPeng Inc. XPEV 1.02% delivered 12,964 vehicles. Li currently has one model on sale and has said a second will become available next year. XPeng has two models in production, and it announced Friday that it, too, is preparing to unveil a new sedan.

Chinese EV sales grew strongly in the second half of 2020 after a prolonged slump in the country’s auto market. Most analysts expect sales to build steadily in line with a government target for EVs to account for 20% of all Chinese vehicle sales by 2025—equivalent to roughly 5 million passenger vehicles a year.

At the same time competition in the electric-car segment is intensifying. BYD Co. 1211 2.13% , China’s largest EV maker, sold 77,611 electric cars in the fourth quarter of 2020—73% more than the three startups combined. The Shenzhen-based company is now the world’s fourth most-valuable auto maker, ahead of NIO, with its share price having more than quadrupled during the past year.

Tesla’s Model 3 sedan, produced at the company’s year-old Shanghai plant, was the bestselling EV in China in the first 11 months of 2020, with more than 116,000 vehicles sold, according to the China Passenger Car Association.

Tesla has priced the China-made Model Y at around $52,580, making it slightly cheaper than NIO’s rival EC6 coupe, the company’s third production car, which went on sale in September. However, NIO offers prospective customers the chance to knock about one-fifth off its vehicles’ sticker price by purchasing the car without a battery, which they can lease from NIO for around $150 a month instead.

One-third of NIO buyers are choosing the battery-lease option, according to Mr. Li.

Tesla’s Model 3 costs around $38,650 after subsidies. Only EVs priced under $46,400 qualify for subsidies—unless, as with NIO vehicles, they have battery-swapping capability.

While Tesla is likely to sell significantly more cars than Li, NIO and XPeng this year, Tesla’s popularization of EVs should ultimately boost its rivals, according to Bill Russo, founder of Shanghai-based consulting firm Automobility.

“Tesla is expanding the market,” Mr. Russo said. “More boats float in a rising tide.”

—Liu Lekai in Beijing contributed to this article.

Write to Trefor Moss at [email protected]