Last year, even under the pandemic, Tesla’s sales more than doubled to $6.66 bn in China alone, one-fifth of its overall sales.
The American automaker continues to top in the Chinese electric vehicle (EV) market after its Shanghai factory launched in 2019.
The Chinese EV market has become the biggest with more than 1.3 million units sold last year, beating Western Europe and the U.S., according to research house Canalys’ report.
The Silicon Valley EV giant entered China in 2013 as a luxury brand with starting price of $121,000 for its Model S unit, competing with luxury car veterans such as BMW and Audi in the market. Last year, the company started to promote its entry-level Model 3 with starting price of around $38,000 and cut several times of its price.
Its Model 3, now becomes the best-seller of EVs in the country.
Growing market, cheaper price, and government policy are major reasons for Tesla to win the Chinese market.
With an ambition to tackle its pollution problem, the Chinese government sets a goal to push EV sales to 40% by 2030, up from 5% today, part of China’s carbon-neutral pledge. To promote EVs, the Chinese government offers license plates for free. Also, China extended the plan for giving subsidies on new energy vehicles such as electric cars to 2022.
Beijing gives green light to Tesla has also been seen as a sign to open up the car market. Back in 2018, China’s car sales fall for the first time in 20 years. Meanwhile, the Sino-US trade war added a tariff burden to imported cars. In response to the trade clash, Tesla hiked the prices of its cars in China by 20% at that time.
Last year, Tesla’s Shanghai factory reached the goal of producing 250,000 units a year. The Shanghai factory was the first fully foreign-owned car plant in China, named Gigafactory 3.
“It’s been a red carpet welcome for Tesla,” the CEO of ZoZo Go, an Asian car market focused consultancy, Michael Dunne said in an interview with CNBC, “because the Chinese government sees the value of having Tesla and its suppliers right there planted inside China, further fortifying China’s stance as the strongest EV industry in the world.”
In 2019, China agreed to exclude a 10% tax on Tesla cars. In the meantime, the government subsidy of 24,750 per vehicle helped Tesla to cut prices. This year, with the Shanghai factory to operate, Tesla cut starting price for China-made Model Y cars by 8%. The Model Y’s Long Range version sold 30 percent cheaper than the price earlier in June 2020. After the cut-price, the demand for Model Y rises.
Tesla is winning the Chinese market, but the future lies risks. Early this month, Tesla faced a backlash in the Chinese market as a video of the protest at an auto show in Shanghai went viral. Tesla was accused of refusal to fix a brake issue. Chinese state media Xinhua and People’s daily later joined the chorus of Tesla critics, showing a sign that Beijing could “dial things up or dial things down”, Tu Le, the founder of Sino Auto Insights, said in an interview with Business Insider last week.
Right now, the Chinese government is investing in domestic brands like Nio. The Tencent-backed company suffered a coronavirus hit last year. It finally weathered the crisis after receiving a potential $1.4 billion deal with the local government.
Local upstarts like Nio and Xpeng more than doubled their sales last year. Li Auto, the other rising star also recorded quarter-on-quarter growth in 2020.
China’s EV sector is becoming crowded ever as tech companies tap into the market. Chinese smartphone giant Xiaomi joins the game to launch its own EV units with $10 billion investment over the next decade, followed by telecom equipment manufacture giant Huawei unveils its smart car system and co-develop EV units with state-controlled automaker BAIC Group.
Shortly before Xiaomi and Huawei’s move, Chinese search engine giant Baidu set up a joint venture with Geely and ride-hailing giant Didi partnered with Warren Buffett-backed automaker BYD to develop EVs.
Technology is another driving force in the EV market. China’s Nio now bets on battery swapping to challenge Tesla, while “Huawei’s autonomous-driving technology has already surpassed Tesla’s in some spheres,” Rotating Chairman Eric Xu said to Caixin Global, a Chinese business news site.
