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Why Tesla And Elon Musk Face Challenges In China

Published on Feb 12, 2019 464,143 views

Tesla recently broke ground on Gigafactory 3 in Shanghai and has grand ambitions in China but it faces serious competition there from a mix of Chinese and foreign automakers already manufacturing electric vehicles there, for example: BYD, BAIC Group, SAIC and Nio; and BMW, Mercedes, Audi and Toyota.

Tesla needs China, the world's largest auto market, in order to succeed. Customer demand and government support for so-called "new energy vehicles" there is skyrocketing.

CEO Elon Musk recently warned that without manufacturing in China, Tesla won't be able to produce 10,000 Model 3 electric sedans per week (as the company has aimed to do for years) and won't be able to offer the eagerly awaited base model at a price of $35,000.

"Bottom line is we need the Shanghai factory to achieve that," Musk said on the company's 2018 fourth-quarter earnings call.

However, Tesla — like other U.S. automakers — faces considerable competition in China.

According to Michael Dunne, founder of automotive advisory firm ZoZoGo, "China produced half of global electric vehicles last year. The U.S. produced about twenty percent. China is clearly way out in front in terms of size, production and scale."

Electric vehicle makers that are already up and running there include:

- NIO, which went public in September 2018
- Warren Buffet-backed BYD
- A partner of Volkswagen and GM called SAIC Motor
- Geely Automotive Group which is the parent company of Volvo
- BAIC Group, and its subsidiary, Beijing Electric Vehicle Co.

A bevy of electric vehicle startups are on the rise in China too, including Byton and WM Motor Tech.

Chinese automakers have benefited from some $60 billion worth of subsidies and incentives since 2012, designed to make new energy vehicles affordable for Chinese drivers, according to ZoZoGo.

But as Musk recently bemoaned, Tesla hasn't been able to cash in on those subsidies and tax incentives. As a result, a Model S that would cost around $80,000 in the U.S. today would cost around $140,000 in China after taxes, for example.

Tesla's vehicles will probably remain very costly in China until the company begins manufacturing at its planned factory there in Shanghai.

Even though Tesla broke ground on its Gigafactory 3 in Shanghai, the company has yet to publish an 8-K filing with the SEC showing that it has secured funding, or secured a material partnership, to build it out.
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Tesla Needs China, But Faces Stiff Competition

Comments
  • CNBC
    CNBC 2 месяца назад (изменено) Does Tesla have a chance in China with so much local competition? Let us know what you think below:
  • Alex F
    Alex F 2 месяца назад CNBC why is Taiwan shown as a part of China ?
  • Sakshi S
    Sakshi S 2 месяца назад @Alex F lool
  • Big Dream
    Big Dream 2 месяца назад Tesla definitely has a chance. They have some of the best features out there, so should be able to gain a reasonable piece of the market.
  • Thomas
    Thomas 2 месяца назад Tesla will dominate China Market and European market as it is in the United States
  • EnvyMiA
    EnvyMiA 2 месяца назад This is really just an opinion piece, and not enough investigative work. If you have been reading news lately, you'd know Audi and other foreign manufacturers are waiting for battery prices to drop before taking an actual commitment to full scale EVs. They did this because when comparing to model 3 they are behind in the skid type technology and about $3-5000 more expensive than Tesla. GM loses money on every bolt sold that's provided mainly by LG Chem. Tesla won't have a problem in China so long as the price reflects the product.
  • zodiacfml
    zodiacfml 2 месяца назад 🙄 That's only half the story. A Gigafactory in China is to increase production and export those cars to other countries.
  • Diego Meza
    Diego Meza 2 месяца назад CBS has fake news go watch FOX news
  • Joey Gee
    Joey Gee 2 месяца назад Better than any other foreign company. The Chinese love Elon Musk and Tesla cars.
  • Peter Cuomo
    Peter Cuomo 2 месяца назад not if the U.S. keep undermining Huawei.
  • 漢仔
    漢仔 2 месяца назад Of course, unless that small minded hegemon tried to stir controversy again. Btw, concentrate more your country's atrocious problem ,rather than caring so much about others. It is better for your propaganda to focus more on one's own internal woes. Look at your debt! You must be trying to shift all these burden to future generations. Don't always hope for the worst for China . The rot start from within! Very bad.
  • William Zhao
    William Zhao 2 месяца назад If Tesla can set the price right (same as US market), there are NO competitors in China. All of those local EV manufacturer are either junks (manufactured by government owned companies) or Ponzi scheme (NIO, Xiaopeng).
  • thsu1
    thsu1 2 месяца назад Alex F I think CNBC stands for China National Business Channel
  • Dudeius Guyson
    Dudeius Guyson 2 месяца назад Ofcourse, China is long term forward thinking about what benefits its people and country. US still has short term greedy ideals, that favor the rich and screw over the middle to poor class. Which is why China overtook us during this last decade since the recession. They took the lead and their people have more wealth than the now destroyed middle to poor class in the US.
  • Nerium Oleander
    Nerium Oleander 2 месяца назад @Alex F Taiwan, officially the Republic of China, is a state in East Asia. Basically it's Taiwan's stupid politics.
  • Nerium Oleander
    Nerium Oleander 2 месяца назад @William Zhao It's not, also many make short trips which do not need such a large capacity or range. There is also transit as well ie. high speed rail for longer travels. Dongfeng alone produced 450,000 commercial vehicles and have produced for Nissan. Geely as well and has shown a steady increase every year since 2000. For about 9k you can get 200 miles range with some other Chinese companies as well. Not really junk at all. As for the Nio, is it because you bought their stock and don't understand much about Chinese companies? Tesla has a lot of improve and could of learned from all these other companies. Rich rebuilds also documents a lot of the problems as well.