The company’s sales in China in 2019 were 40,000 units, up 161% from the previous year. When the COVID-19 epidemic broke out in 2020, the automaker still set a sales record in March and April.
The danger of a ruler
When Tesla built its giant electric vehicles manufacturing plant Tesla Gigafactory in Shanghai in 2018, other Chinese domestic EV manufacturers were all concerned by the arrival of an overly strong foreign rival. This seemed to go against the previous policies to encourage domestic EV development by the Chinese Government.
The country has spent years and billions of dollars investing in domestic EV manufacturers and developing their own domestic market. How will it be beneficial to open the door to a “predator” like Tesla for domestic businesses, especially when the new Chinese policy gives Tesla the full privilege of other domestic automakers?
So what really happened after that. Will the Chinese carmakers really be destroyed? Let’s look at a typical example, that is Nio, the EV company which has a challenge that will knock Tesla out of the Chinese market.
In October 2019, the challenges posed by Tesla caused Nio’s stock price on the New York Stock Exchange to plummet to as low as $ 1.19.
But then, Nio shares had a spectacular recovery. In October 2020, its shares rose more than 1,000%, reaching $ 26.5/share. Particularly in the session on October 14, Nio shares increased 22%.
With that, optimism has returned to other domestic EV manufacturers. In September 2020, Chinese EV startup WM Motor said it had raised 10 billion yuan ($ 1.47 billion) from a group of investors led by the Chinese government-owned right after some of the company’s big rivals went public.
It is said that the Chinese insight is the ‘catfish effect’, which comes from a story that is widely quoted and discussed in China. This story tells that many years ago in Norway, there was only one captain capable of bringing the live sardines ashore after each fishing trip. His secret was putting a catfish in each sardine tank. The catfish chased and the sardines had to swim continuously to stay away from the catfish or they will be eaten. Because they were always active, they avoid stagnation due to being locked for a long time and then could live longer.
Beijing calculates that by releasing the ‘catfish’ Tesla into the Chinese market, the domestic EV manufacturers will move harder to compete and survive.
A symbiotic relationship
In addition to the benefits China has for Elon Musk’s Tesla, building a factory in China also brings in a staggering amount of money. The Shanghai facility was financed almost entirely through state-controlled banks that can expect a pretty big return on their investment. In addition, Tesla also signed a land lease contract lasting 50 years, transferred directly to the Chinese government.
In addition, 30% of the equipment and materials for factory construction are purchased from Chinese suppliers. In the long run, these activities will help nurture the vast supply chain expansion in this country.
Chinese policymakers recognize that the long-term benefits from developing an extensive EV supply chain in China will outweigh the short-term vulnerability that local rivals like Nio, WM Motor, and Li Auto, Xpeng Motors, BYD are suffering by the arrival of Tesla.
This is similar to the fact that Apple factories process components in China, thereby helping to nurture the vast supply chain here, prompting the rising of the Chinese smartphone manufacturers such as Huawei, Xiaomi, Oppo, Vivo…
On the other hand, the presence of a famous name like Tesla will also make foreign consumers pay more attention to the Chinese EV market. As a result, domestic EV brands such as Nio and Xpeng have the opportunity to reach global consumers as “Tesla-killers”, thereby expecting to improve sales.
Universalizing EVs in everyday life
The Chinese government supports EVs in their efforts to reduce air pollution, causing demand for EVs to soar in the world’s largest market. By 2025, China aims for EVs to account for 25% of all cars sold, with Tesla potentially leading that charge.
Tesla’s bestselling Model 3 EV in China has fueled the domestic market so much that owning an EV is now a status symbol of the urban elite. in China.
Big sales will help manufacturers gradually lower the price of EVs, creating an incentive for EVs to become more popular. The prospect of such a market is the main reason that the Chinese government has supported local producers in recent months.
With such a vision, Beijing is not concerned by the latest figures showing that Tesla’s monthly EV sales in China are far ahead of its local rivals. In a way, this is part of the Chinese plan.
