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The loss of Tesla's executive director Elon Muska to China could be jeopardized by local rivals


April 18, 2019 02:55:36

Even according to Elona Muska's standards, his plan in Shanghai is ambitious: take 86 hectares of muddy agricultural land on the periphery of the city peninsula and start producing Tesla model 3 from China within a year.

Key points:

  • China is a world leader in the manufacture and sale of electric vehicles
  • Teslin CEO Elon Musk wants to produce cheaper electric cars in Shanghai for Chinese drivers
  • They will face more than a dozen Chinese car manufacturers who are already on the market

Few of those who believe that such a time frame from turning the first step to delivering the first car is realistic, but there are few entrepreneurs like Elona Muska.

"China does not have a man like Musk," said Jia Xinguang, a veteran of Beijing.

"It's pretty surprising how his company is developing fast," he said.

Elon Musk does not say exactly what he has been upgrading to build "Gigafactory" in Shanghai, but some analysts have put a total investment of $ 2.7 billion – most of which comes from Chinese state banks.

After announcing his job in mid-last year, he went on a dark rainy day in the morning to visit the soaked fields with the mayor of Shanghai, planted the Tesla flag and declared his factory the beauty of the city.

"It is likely to be one of the most advanced factories in the world of any sort, perhaps the most advanced," he said at a revolutionary ceremony.

"It is very impressive to see Shanghai's ability to build things, so we believe that with resources we can build the Shanghai Gigafactory in record time," said Mr. Musk.

He said that the factory in Shanghai would only produce Tesline 3 and Y models – the smallest and most accessible sedan, where the company sets its future.

What Tesla produces more, it costs less, and Musk sells more.

"Some believe that the cost of producing China's model 3 in China is only half the size of that in the US. So if the base model currently costs more than $ 35,000 in the US, Tesla may in the future receive $ 20,000 in China, "Mr. Xinguang said."

"That would certainly have a huge impact on the Chinese market of new energy vehicles," he said.

Tesla first on the Chinese electric boom car

Gambling by Mr. Muska from China is impossible.

More than half of the world's electric and hybrid vehicles are sold in China, and annual sales are growing fast despite the slowdown in gasoline cars.

Electric vehicles now account for nearly 5 percent of the Chinese mass automotive market, and the government wants them to count on one of every five new cars sold by 2025.

Some of the most wanted analysts believe that China is on the path to doubling this goal, although the planned abolition of state subsidies is likely to limit growth.

"Chinese consumers are very sensitive to the price, so the reduction in subsidies will almost certainly have an effect," said Cui Dongshu, China's secretary general of passenger cars.

China's electric ambitions this week were in full swing with nearly twenty Chinese car makers displaying electric limo, SUVs and concept cars at the Shanghai Fair.

The government now finds other ways to push what it calls "New Energy Vehicles" (NEVs), including an innovative cap-and-trade scheme that punishes Chinese automakers who do not produce EVs.

While China lags behind in some Scandinavian countries because of the share of electric vehicles on the roads, the policy and scope of the market have made it the center of race among the producers to dominate the future of the global industry.

"I do not think it is risky for Elon Musk to make such a big investment in China," Cui said.

"Shanghai's technology is advanced, the cost of the work is not very high and I think Tesla will harmoniously live with domestic competitors."

Helps Tesla and Elon Musk respected in China.

During a visit last year, a mid-year salesman became known after Mr. Musk bought one of the snacks and drank it on the side of the road.

In his later visit, his traditional dinner in Beijing was captured by fans and circling around the Chinese Internet.

Tesla's enthusiasts regularly drive to sites outside of Shanghai and cross over to him, posting videos documenting the pace of progress.

Chinese Prime Minister Li Keqiang even reportedly offered Musa's permanent residence when they met in January.

Chinese electrical manufacturers are ready to take over Tesla

China is not just a land opportunity for Mr. Muska.

It is also a place where Tesla will most likely meet his match.

China can boast of more than a dozen companies producing hybrid or wholly electric vehicles – from state-owned to large private companies and smaller start-ups.

It is a private company BYD that is most likely to represent the biggest competitive threat.

The company headquartered in Shenzhen approached Tesla's 245,000 shipments last year, with a huge amount of cars sold in China.

Another car maker, BAIC, owned by the Beijing government, has produced the country's best-selling model: a compact EC series sold for $ 35,000 before subsidies.

"The main reason I bought one is because the state subsidy has halved the price and it is easier to get the license plates for electric cars," said Beijing resident Kelvin Fung, who bought BAIC in February.

He said that the policy that allows electric car owners to drive seven days a week, instead of being subjected to a six-day constraint on the congestion of petrol cars, is another incentive.

"Personally I think Chinese cars are not as good as overseas brands, but they are pretty cheap," he said.

The reports on quality problems and suspicious claims on the range further reinforced the view that, despite the enthusiasm of both government and domestic car markers, China still does not produce true rivals Tesla.

"Elon Musk can design special products that include human heart, unlike electric cars designed in China, are boring," says Jia Xinguang.

"Chinese electric cars are not that fun," he said.



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