Analysis: What Can Tesla Bring To China?

- Oct 22, 2018-

Tesla's quotation of 734,000 yuan in mainland China accounted for 67%, 3% and 30% of the price of car, transportation and handling fees and taxes, respectively. Due to the current Hong Kong government exemption from the first registration tax on electric vehicles, Tesla Hong Kong is nearly 300,000 yuan cheaper than the mainland. After Hong Kong owners purchase Tesla, the government will negotiate with the owner’s property, install charging piles, and provide free charging. The lithium battery used by Tesla supports multiple charging modes. The charging process is very convenient. Just use a special 220 volt, 70 amp outlet at home and charge for about 3 and a half hours. The amount of battery used at one time is only equivalent to one ordinary laptop.

Tesla, a well-known American electric car known as the “Apple in the automotive industry”, is about to enter the Chinese market. Due to the non-compliance with domestic new energy vehicle subsidy standards, the same model in China's Tesla is nearly 300,000 yuan higher than Hong Kong.

Recently, the Ministry of Finance and the National Development and Reform Commission and other four ministries and commissions issued the "Notice on Further Promoting the Application and Promotion of New Energy Vehicles" to slow down the progress of subsidies for new energy vehicles, but the economic subsidy policy does not include Tesla.

Similarly, as a new energy vehicle, Tesla should not enjoy China's preferential subsidies. What impact does Tesla have on China's electric vehicle market?

Squid in the field of electric vehicles?

Although the Tesla Model S, which will be listed in China, does not meet the Chinese government's subsidy policy for electric vehicles, the vice president of Tesla still said it would try to apply. There has been debate in the industry about whether Tesla should be included in the scope of subsidies.

Proponents believe that subsidizing Tesla can produce a squid effect and promote the development of domestic new energy auto industry.

Miao Wei, Minister of the Ministry of Industry and Information Technology, said earlier that “new energy vehicles and electric vehicles may be an opportunity for us. To be frank, our traditional enterprises are dragged down by the inertia of thinking, technological path dependence and existing assets. It is difficult to be motivated. Of course, we also have some restrictive factors objectively, but the government is not doing nothing. The government is to create more an environment that encourages competition and use competition to continuously promote technological progress of enterprises. We are also discussing It is not possible to put one or two black horses in, to mobilize the vitality of the enterprise and to mix the water of the pool."

So, can Tesla be the black horse in the mouth of the nursery?

Tesla, which can compete with fuel vehicles, has brought a huge demonstration effect to China's new energy vehicles. In order to enhance the endurance, Tesla built a completely free super charging station, and the robot can complete the battery pack replacement in 90 seconds.

Whether it is technical, design or business, Tesla has got rid of the inherent thinking, which is precisely what domestic new energy auto companies lack.

Comparing the sales volume of the two, in the fourth quarter of last year alone, Tesla's shipments reached 6,900, and the annual sales have exceeded 20,000. According to Ye Shengji, deputy secretary general of the China Association of Automobile Manufacturers, the total output of China's new energy vehicles in 2013 was only 17,500.

The most important reason for China's electric vehicle companies to stay in the private consumption market is the lack of exploration and design of business models. They have been waiting for policies and lacking the courage and strength to take the lead, bravely try, and the belief in leading the market.

Tesla is chasing the squid behind China's new energy auto company. Its sudden emergence has enabled the world's major automakers to increase their investment in electric vehicles and pressure on China's new energy automakers.

At present, China's new energy vehicles are following the trend from low-end to high-end, and are still at the level of technology and price. The only thing that can compete with Tesla is the subsidy advantage provided by the government. If the new energy auto industry is also cooking boiled frogs in the traditional auto sector, then China's new energy auto industry will lose a rare chance to catch up.

Will it lead the wolf into the room?

There are also many people who object to it.

Dong Yang, executive vice president and secretary general of the China Automobile Association, made it clear that the association did not agree to let go of the restrictions on foreign shares in the field of automobile production. He provided the reporter with a "Opinions of the China Association of Automobile Manufacturers on Disagreeing to Release the Ratio of Foreign-funded Shares in the Whole Vehicle Production Sector", and said that the China Automobile Association has organized several major seminars on this issue. The consensus was finally reached.

"The automobile industry is not a general manufacturing industry, but a strategic industry that supports the transformation and upgrading of the national economy." Dong Yang analyzed, "If you give up the dominant position of development now, the automobile industry will become a processing factory for foreign products."

There are also other automotive experts who support this assertion. According to its analysis, from the historical experience, the reason why some Latin American countries fall into the "middle income trap" is because the pillar industries such as automobiles are controlled by foreign countries, and the development of the automobile industry cannot be used to drive the comparative advantage of the country. Ultimately, new competitive advantages are difficult to form.

The Chinese market is a market that no world-class company can refuse. In 2013, Tesla opened its first direct-sales store in China. It has sold more than 200 cars without having announced the price, which shows its popularity. Although Tesla is still a luxury item, its cost will gradually decline as technology advances and production scale expands.

As an important emerging industry, new energy vehicles are in the process of standardization. Not only China, but countries are formulating their own industry goals and market regulation. For China, the new energy vehicle involves a strategic industry that will develop the country's strength in the future. The entry conditions are set to prevent foreign advanced technology companies from once again forming a technological monopoly position in China.

Once the gate is opened, Tesla will be included in the scope of subsidies. It is still unclear whether China's new energy auto industry can withstand its huge impact, whether it will be self-defeating, and people will inevitably squeeze a sweat.

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