Tesla Moving Forward With Plans To Dominate China

2 weeks ago by EVANNEX 6

Elon Musk

Earlier this year, Elon Musk sat down with China’s Vice Premier Wang Yang in Beijing

TESLA CHINA: UNTANGLING ELON MUSK’S PLANS FOR THE EPICENTER OF ELECTRIC CARS

China has always represented a massive market opportunity for Tesla. And, last week, a recent report suggests Elon Musk is one step closer to a breakthrough deal in Shanghai. According to the Wall Street Journal:

“Electric-car maker Tesla Inc. [NASDAQ: TSLA] has reached an agreement to set up its own manufacturing facility in Shanghai, according to people briefed on the plan, a move that could help the company gain traction in China’s fast-growing EV market.”

This could make Elon Musk the first auto executive to work out a deal of this kind: “The deal with Shanghai’s government will allow the Silicon Valley automaker to build a wholly owned factory in the city’s free-trade zone… This arrangement, the first of its kind for a foreign automaker, could enable Tesla to slash production costs but it would still likely incur China’s 25% import tariff.”

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Matt Pressman.

Tesla

Tesla already boasts the longest range of any electric vehicle sold in China (Source: Nikkei Asian Review)

What makes this deal different from other automakers that have local factories in China?

“Until now, foreign auto makers have built cars in China through joint ventures with local manufacturers. That allows them to avoid the 25% tariff on autos, but also forces them to split profits, and potentially share technology, with the local partner—something that has tripped up Tesla’s previous efforts to expand there.”

Tesla

Tesla’s massive, new 50-stall Supercharger station located at the Lilac International Business Center in Shanghai, China (Source: Teslarati via Jason Man)

There are some clear benefits to the approach Elon Musk appears to be taking: “Not having to form a joint venture with a local company will allow it to safeguard its technology and retain 100% of profits.” Furthermore, WSJ writes that: “Elon Musk has significant star power in China, where he is regularly feted in the media as a tech visionary. That has helped the upstart become the only foreign maker to make significant inroads into China’s electric-vehicle market—despite being the only one without a local base.”

Tesla

Tesla’s sales in China as a percent of total sales (Source: Wall Street Journal)

After challenges in its first few years there, Tesla’s sales in the region have been growing: “Tesla sold roughly 12,000 imported cars in the first nine months of this year, up from an estimated 11,000 in 2016 and good for 4% of China’s plug-in market, according to EV Sales, a website tracking the sector. Tesla hasn’t revealed unit sales figures, but says China accounted for $1.1 billion of its $7 billion revenue last year, second only to the U.S.”

Above: A look at China’s solar and electric vehicle initiatives and how it’s looking to expand EV charging infrastructure nationwide (Youtube: CGTN America)

Meanwhile, “China’s electric-vehicle market—already the world’s largest—is primed for growth. The Chinese government is targeting seven million EV sales a year by 2025, up from 351,000 last year, and in September it ordered all auto makers already operating in China to start producing EVs by 2019. Officials have also said they are working on a plan to ban gasoline cars.”

Tesla

Tesla’s Model X displayed in Beijing (Image: China.org)

And, according to Green Tech Media, “Electric cars in China are on track for a record year… predicted to sell 700,000.” (Editor’s note: 78,000 plug-ins were sold in September, bringing the YTD today to almost 400,000 after 9 months).

Yet, even with China’s local automotive manufacturers ramping up EV offerings, Piper Jaffray’s Alexander Potter reports (via CNBC), “After meeting with an electric vehicle (EV) trade group this week in Beijing, we still think Tesla has little to fear from Chinese brands… we think nobody (least of all Chinese OEMs) can compete with TSLA.”

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

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6 responses to "Tesla Moving Forward With Plans To Dominate China"

  1. Terawatt says:

    Maybe I’m just too stupid, but it’s frankly a bit difficult to see why Tesla is in such a hurry to improve its presence in China given that everything points to Tesla being utterly incapable of serving demand elsewhere until at least 2020.

    Maybe this doesn’t require a huge amount of resources. Maybe there’s something else I don’t know that means this is sensible to do. But it surely also means Tesla will take even longer to get to a point where it can meet demand. Model 3 alone seems very unlikely to not have waiting lists at least into 2019, and Model Y is supposed to come along sometime that year…

    1. MB says:

      That is poor speculation and completely off base. This is a relatively big market for Tesla that is going to become even bigger. China has the most automobiles and customers.

      1. ffbj says:

        Yes, I think that striking while the iron is hot is the point.

    2. Ron M says:

      Name a CEO that you think does a better job than Elon Musk.

    3. MarkP1950 says:

      If Trump and the EPA screw with Tesla we will always have China….
      Also it will pay to play US vs China for benefits.
      Also include India in the mix…

    4. Pushmi-Pullyu says:

      “But it surely also means Tesla will take even longer to get to a point where it can meet demand.”

      I think most manufacturers would kill for the opportunity to be in a position of expanding demand so much that it will take them longer to grow enough to meet it!

      Tesla very much wants to grow from a middling-small auto maker into one of the world’s largest, and wants to do that as soon as it possibly can. This new deal, if it’s what this article claims, will be a giant step in that direction.

      The fact that you’d characterize Tesla increasing its potential market as a bad thing, Terawatt, suggests you are incapable of looking at things from Tesla’s point of view.

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