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Tesla At An Advantage In Chinese Market, But Faces Domestic Competition There

Tesla At An Advantage In Chinese Market, But Faces Domestic Competition There
While Tesla if often regarded as the first name that pops up in mind when talking about luxury electric car, in the largest electric car market of China, Tesla does not enjoy the same degree of reverence.
Shanghai was announced as the location for the second Chinese Gigafactory factory for Tesla last month that now holds about 8.6 per cent of the China market. But there are questions about whether this move would be enable Tesla to contest the thriving domestic electric car makers.
The changing laws in China amidst the current US-China trade war could run in favor of Tesla in the market. under previous laws, foreign companies intending to sell cars in China would have had to pay a 25 per cent import tariff or would have had to set up a 50-50 joint venture with a local player. Last month however, China relaxed those regulations for foreign car makers getting into the market through joint ventures with domestic brands.
That move has helped Tesla as it reportedly has set up a wholly-owned subsidiary in Shanghai with investment of $15.8 million on May 10, according to information from Chinese finance media outlet Yicai. Following that, the company further announced in June the setting up of its gigafactory outside of Shanghai.
Additionally, Tesla will not have a problem with China announcing import tariffs on American goods worth $34 billion which also includes electric cars because it would now be able to manufacture its cars in China itself and hence be not affected by the import tariff.
With a total of more than 1.23 million electric vehicles, about 579,000 electric vehicles were sold in China in 2017 according to estimates by Forbes compared to 198,350 sold in the U.S. in the same period.
Government incentives that offer subsidies to Chinese buyers of electric cars has had a significant impact in the sale of such vehicles in the country.
Speaking at the National Governors Association last year, Tesla CEO Elon Musk said: “sometimes people are under the impression that China is either dragging their feet or somehow behind the U.S. in terms of sustainable-energy promotion, but they are by far the most aggressive on earth.”
And those environmental efforts have been stepped up by China with raising of subsidy to 50,000 RMB ($7,900) for electric car buyers with a range of more than 249 miles on a single charge in February. This will definitely help Tesla because its Model 3 cars can make a total of 310 miles on a single charge.
But there is competition for Tesla in the Chinese market from domestic electric car makers with its car makers attempting to combine the environmental effectiveness of electric cars with the looks and feel of a sports car.
For example, one of the domestic companies that can be a serious competition for Tesla is Nio, which is set to go public later this year. The company launched its ES8 model last December which costs about half of what a Tesla Model X costs.
On the occasion of the launch of the ES8 model, Nio Founder William Li said that “we do have lots of customers that turned to us from Tesla, and many who have bought products from both. For sure I think Tesla is our rival in that consumers will choose between our products.”

Christopher J. Mitchell

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