Why Tesla And Elon Musk Face Challenges In China

Why Tesla And Elon Musk Face Challenges In China


China’s electric
car market is skyrocketing and
Tesla needs the world’s largest auto
market in order to succeed. China produced half
of global electric vehicles last year.
The United States produced about 20%. China’s clearly way out in front
of the United States in terms of
size and production scale. Analysts are expecting
that in around five years, EV’s
and hybrids will represent about 20% of the overall vehicle
market around the world. Just the
size of the Chinese market is so
appealing to anyone that makes cars. China is one
of the biggest proponents of electric vehicles.
In 2017, China sold 777,000 new energy vehicles, a 53 % increase over 2016. And China is expected to reach 2,000,000 EV’s by 2020. Since 2012 , there’s been more than $60 billion in direct subsidies to lower the cost of
electric vehicles for Chinese consumers. So
by the time an electric vehicle lands
in a Chinese driveway, it may
cost as little as $10,000 to $12,000. But Tesla has
faced one big disadvantage. In China,
which is the biggest market for
EV’s we have never had any subsidies
or tax incentives for vehicles. Trade tensions
that led to high taxes for
U.S. autos imported to China have hurt
Tesla’s bottom line. An $80,000 Model S
in the United States runs about $140,000
in China after taxes. To succeed
in the region Tesla has no choice but to make its cars there. Once they can start manufacturing domestically
in China, they can evade some
of the costs of those tariffs. They’ll have a
local supply chain setup. It will just alleviate
so much pain for them. This is why Tesla
broke ground on a new factory in Shanghai
this year and Elon Musk is rushing
to start production. We need to
bring the Shanghai factory online. Our car
is just very expensive going into China
for import duties, we got transport costs,
we’ve got higher cost of labor here
and we’ve never been eligible for any of
the EV tax credits. Once the cars made
there it is eligible for that. The
new Gigafactory is also what will allow
Tesla to offer the Model 3 at
an affordable price. Bottom line is
we need the Shanghai factory to achieve
that 10k rate and have the cars
be affordable. The inhibitor is affordability.
If we made it more affordable, the demand
is extraordinary. Allowing foreign automakers to
come in and own their own
factory and operate domestically in China
was huge for Tesla. China’s going
to be a massive theme for Tesla in
2019. So much of their future business
hinges on how well they do in
China. How quickly they get that factory
up and running. The Chinese government
has helped Tesla tremendously by giving
them a special dispensation so that
they can be an independent foreign
auto manufacturer in China without
needing a local partner. Tesla’s not required
to have a joint venture partner, it
can own 100% of its operation
here. That’s a real nice break in
timing for Tesla. It’ll allow them to
control their operations in China, which
no other global automaker has been able
to do so far. Just because Tesla
is opening a factory in China isn’t a
guarantee that it will be a success. Tesla has to sell
these products at a profit. They still
have to get the consumer to fork over
a huge amount of money for their product. But perhaps the
biggest challenge Tesla faces in China
is steep competition from established
players. Companies making EV’s in China they range from
really large players like BYD, which
is backed by Warren Buffett and BAIC,
which is backed by the Chinese
government there. Porsche has the Taycan, Jaguar
has I -PACE, to new players like NIO.
Tesla’s got a lot of competition
locally in China. NIO is basically
the pioneer. We’re the first with a
premium electric vehicle in China and
the only other company with a premium
electrical SUV in China is Tesla with Model
X. Ours comes in less than half the
price. So we think we compete very
well and is customized for the modern Chinese family. It’s a variety
of long established brands like
General Motors, Volkswagen. Ford is participating
in this as well but they have
oftentimes paired up with other Chinese based
companies like BYD, Geely, SAIC. Unlike
the U.S., China’s EV manufacturers
have focused on creating short range,
low cost and low speed electric vehicles. With most coming
in under $20,000. I think their biggest risk
will be to a certain extent companies
like NIO that have a lot of
cash and have invested a lot in the design
of their cars and have some kind
of interesting things maybe that are
the next level. Aside from
the larger automakers numerous startups are
also entering the space. According to
our own database, there are at
least 50 Chinese startups in the electric
vehicle spaces that’s phenomenal when you
think about it. Some of
Tesla’s biggest competition however, could come
from other foreign luxury brands also
entering the Chinese market. Automakers
like Porsche, Audi and Mercedes are
all releasing EV’s in 2019 that will
compete directly with Tesla. A company like
Mercedes has been in China for a long
time. They’ve got a network to sell
cars so they’ve got this head start,
especially on the network part of
it right. They’ve already got their
factories running and then here comes
Audi, here comes Mercedes, here comes
BMW with battery electrics sort of for
the first time. I think there’s no way
they can’t go to China. You can’t ignore a
market of that size especially if you’re
a luxury brand. But even in
a crowded market, Tesla could still be
a formidable player in China. One thing Tesla has
going for it in China is the
appeal of this Western brand. They’re an
early mover in EVs. They really made EVs
into a luxury thing instead of these
little short hop kind of golf carts. And
the appeal of Elon Musk is there
too. He’s a wild character. He’s an
outspoken, unconventional CEO and people are really committed to the company’s mission. You know they believe
in it. The good news for Tesla is
that China is home to the largest luxury
car market in the world by far. And Chinese buy
twice as many luxury cars as Americans
do. More than two million last year.
So there’s no question the potential
is there. It’ll come down to
execution. Can they get that plant in
order and running quickly and make sure the
quality is there? The Chinese will be
forgiving on price but not on quality.
If there’s any quality issues, they
can be punishing.

100 comments / Add your comment below

  1. Oh my. So Tesla abandons USA just like GM. Nice. The government need to stop subsidies on everything. Why should taxpayers help these companies when they leave anyway. I don’t care what they need to do to survive as long as my taxes go to something like hospitals or schools or infrastructure that everyone can use. They probably need to go to China and that’s fine. Just stop asking the government for help. Tesla has its handouts and so has GM. Enough already.

  2. Tesla have away been a dangerous competitor for automotive manufacturers. Because they give you more for your money, that other will short you out and charge you the same.

    Tesla is good for the people, and are open to competition. I mean, they open source their tech to other companies.

    This company have done it all, even as today. Not many automakers provide the car's that Tesla manufacture. Like the semi, Suv, small suv, large sadam and electric truck that has power.

    Tesla, is the Ford of is days. And everyone want's a Tesla even if their technology may get old on some is model, but is still better than other car manufacturers as today.

    Can't wait what next with this guys.

  3. Thank you DemoRepublican for sending our manufactures outside the country.
    Both parties are bunch asswipes traitors!

  4. I saw a lot of comments about how the Tesla's tech will be stolen blah blah blah
    Tesla opened up their patent portfolio a few years ago, they WANT other companies to make use of their patents to speed things up and replace conventional vehicles.

    https://www.tesla.com/zh_HK/blog/all-our-patent-are-belong-you

  5. No spare parts? There is no way of growing Telsa! No dealers no spare parts no fixing your vehicle???

  6. Yay, electric vehicles supplied fuel by non-renewable fuel sources and lithium batteries made from non-renewable resources smh

  7. Lol tesla is still the best electric car by 1000x times. Chinese ppl will buy it more now that it is cheaper and has the exception. The only challenge they face is producing enough cars per day.

  8. Elon doesn't know about China.
    He thought he know and understand China better than any other.
    China will take everything from Tesla.
    Enjoy being together with partner.

  9. US top entrepreneurs fight for China market to be able to survive and be profitable ….
    Hmmmm history changing course … looks like super cheap products and use of Chinese employees for super cheap will fade to the past,
    poor successful US small and middle entrepreneurs – how they gonna make money without their Dollar superiority ))))
    Time to start real work and innovation, not just cheap use or it will be too late – Musk innovate, eBay-preneurs and Amazon-preneurs ummmm not so much ))))

  10. Tesla problem it's money. They have already a massive debt for the first gigafactory and they are not making any profits from it. Who is going to lend them the money for the second one at a reasonable rate?

  11. 8 of the top 20 advertisers on CNBC are auto manufacturers, auto insurance companies, and oil companies. So of course CNBC and other television news outlets have a huge incentive to trash Tesla. Those advertisers include 4 of the top 6 advertisers on their network.

    If you've ever wondered why TV news and in particular CNBC focus so heavily on trashing Tesla, just follow the money. Telsa doesn't advertise. Telsa products doesn't use gasoline. And soon self driving cars will reduce the revenue for the auto insurance industry. Without the 3 core types of advertisers, CNBC's ad revenue would fall by a minimum of 40%.

  12. In China I see only such EVs: Tesla, local brands (BYD, NIO and some others which I dont know), but mersedes, audi and bmw are all still seems focusing on combustion engine (I did not see any of these brands EVs in Shanghai or around areas), I assume these slow and not flexible companies will have or already have hard times.

  13. Tesla is no.1 in electric vehicles. In technology. I believe in them.last year I was in Hong Kong. They are everywhere in the city. The model S most.😁😉

  14. Why people don’t watch CNBC about your reports on Tesla or ?, because you guys are ignorant about technologies and bias.

  15. Tesla is the ONLY serious EV automaker. Right now, Tesla's rivals will fall behind in EV tech as they struggle to Split R&D between Combustion Engine Cars and Electric Cars. Besides, Tesla has the Battery manufacturing capacity and the Battery Tech to take them into the next Era. They are my largest position.

  16. wow 80K in US, then 140K after tax in China. CCP really know how to do business and stole the technology. No prob, Prof. Trump follow your rail CCP, and he is very good at it. wait of 60% tariff to come

  17. of course tesla model 3 will win, don't you see how beautiful is that car compared to the other competitors with their golf childish fantasy design cars?

  18. See this https://www.nytimes.com/2012/05/30/business/global/byd-releases-details-about-electric-taxi-fire.html . Passengers was electrocuted, then burned alive. BYD paid a lot to cover that up.

  19. Chinas ev market is rough but people really buy Teslas because their electric, they buy them for the autopilot, and because they're a very safe car, also their new model is going to be the fastest car in the world so that's going to put Teslas name on top

  20. So Tesla is going to go up against Government funded and backed companies in CHINA. China does not play fair and they steal.

  21. They'll do fine in Asia with that factory lol, Asia has third of the worlds population so plenty of room for competition.

  22. Tesla will be HUGE in China. 63% of Americans who buy Telsa's TRADE UP to a more expensive Tesla. Plus China does to allow anyone to buy a car. You have to get a PERMIT to buy a car. While China has dropped the cash incentives for EV's, China as changed the licensing law so that EV owners do not need the permit. If you are buying an EV you can buy it without any permit. I estimate when Chinese customers can reserve their Teslas they will do so in the hundreds of thousands.

  23. this is ridiculous because Tesla cannot keep up with the demand in the US and the world other than China. Tesla should not focus on China at all.

  24. In EU and USA the car makers are extremely against EV and have used lobby and misinformation campaigns to stem the demand. GM has even turned itself into a tax-payer's money eating machine thanks to its ties with the Republican Party. Board members are laughing their socks off for having found that new racket. Till this day, there is an avalanche of misinformation and derogative and negative news about Tesla, America's only hope and best performing car company, just because the fossilised fossil fuel interests, aided and abetted by the Trumpists, are permitted to spread their lies all around. It is they, and nobody else, who finance the climate change denial campaigns. I have an old hockey friend who is in the news and gets €250,000 a year for just denying and ridicule the idea that climate change has been human induced. In my country, the PM (Rutte) is supported by fossil fuel interests and he obstructs all research and development that would wean our country from fossil fuels. This guy is a possible candidate for becoming the boss of Europe, so that all of Europe can become fossil fuel addicted again. With all that duplicity, we are living in a really bad world today.

  25. Different market segment, even for EV in general. Some people buy iPhones, and others buy Android phones like MI, or oppo, and vivo. Tesla will be like iPhone, and other brands are like android. I believe they will all win.

  26. China will steal what little technology Tesla has and thumb its nose at Tesla in the rigged Chinese court system. Their Chinese court system has sided with a Chinese company that produced an exact copy of the I-Phone (including the logo). Western technology companies don't stand a chance in China.

  27. Hye elon launch your tesla in India, we are Eagerly waiting for it….. Lots of demand for tesla is here……

  28. Tesla have no competition at all, they win hand down on EV. The other are just patching together a car with battery while Tesla makes Real EV and that is why ppl are lining up to buy Tesla while no one give sh*t about Other so call Ev lol..

  29. They missed Tesla's main advantage over other brands in China and everywhere else, superior technology. It's a company dedicated to innovation and at least 5 years ahead of any competition in technology. What the legacy makers are missing is Tesla is not competing with their EVs but with their ICEVs and very successfully. In turn the legacy makers have to compete with Tesla but, without the commitment and investment needed and a serious dose of innovation, not only will they not catch up with Tesla they will face significant competition from rapidly developing Chinese brands when they are ready to export in the very near future.

  30. I live in China. Tesla will smash it here. The status symbol Tesla hold is huge here. This market will transform Tesla into the number one player.

  31. It is pronounced “Porsche”, all the letters have sound.
    That is not the only thing you got wrong but thanks for the mild FUD!

  32. GF3 is ready , production will starts soon. Tesla is just well appreciated in China, is a must have.

  33. JESUS (Fish: RC-PRE-MUSLIM): Hindu (Vegetarian) – BUDDHIST (Vegetarian) – LABOUR (Marx-Green::: 33.33%).

  34. When Tesla's manufacturing quality will be at the same level as our Europe's like Audi, BMW or Mercedes Benz, I´ll buy it.

  35. Tesla come to India your faith will be change we are at scratch just got nitrox we want ev long rang i will be frist to be buy.

  36. Judging on how Tesla is killing the luxury market in USA and starting the same pattern in Europe. China market will be even more successful for Tesla, considering Tesla cutting edge technology which put to shame all its EV competitors, at least 4 or 5 years behind. The shear safety, unparalleled performance, Its much better range of operation, its supercharger support, and connectivity that enable every Tesla owner to have his car take advantage of the latest Tesla Tech improvements, will guaranty commercial success in China too.

  37. 👍 tax more Chinese goods to USA. China just wants US companies to bring the Technologies there ? but does not like them selling in China.

  38. 假的假的,千万不能信啊,我们茶叶蛋都吃不上,这辈子第一次吃茶叶蛋还是在美国留学的时候来自弯弯的同学请我吃的,我的天呐,那时候就感觉这辈子没吃过这么好吃的东西,所以我才觉得一定要在美国发奋图强,以后让全家人每周都能吃到茶叶蛋

  39. and now China gets all ev related tech from telsa in return boosting their own production of ev's China is such a smart ass…

  40. China won't allow an American company to do business there even though they allow they transfer the technology and start their own company as they did to Google and Facebook.

  41. https://youtu.be/e-WqlVJ-kmk Anthony Williams is a NON-Violent "offender" but actually a Patriot DEFENDER
    of HOME OWNERS Right to their own HOME. So Bank atty.s
    and Prosecutors and Judges have all combined their efforts to LOCK him up… for the crime of stopping FORECLOSURES based on Forged documents by attys. claiming to represent banks. WoW, W o W, W O W. Pres. Trump should be ordering his release, and might but the Judges are blatantly violating his "RIGHT to a Speedy Trial", so he sits in federal detention withOUT bail, and withOUT Trial. thanks to Judge Mathews, & Kobayashi, who probably need to be INDICTED themselves for CONSPIRACY with Prosecutors to delay Trial Indefinitely.

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