Written by: Charles Morris; Source: South China Morning Post
China is a famously inscrutable market for Western companies—particularly Western automakers. So how is it that the top-selling electric vehicle in the country is made by an American upstart?
 |
Tesla’s Model 3 has been handily outselling EVs from local brands. In June, Tesla delivered 14,954 Model 3s, capturing 23 percent of total EV sales. The second-place BYD Qin EV3 sold 4,106 units.
In July, a tiny and super-cheap new model, the Wuling Mini EV, made its debut, and sold an impressive 7,340 units. With a price of around $4,200, it’s expected to become a huge seller. Even so, Tesla easily took the top spot for the month, delivering 11,575 Model 3s.
The Chinese EV-makers know they have a problem, and as Daniel Ren writes in the South China Morning Post, they’re pursuing a variety of strategies to try to knock Tesla off the hill. Some are developing models with ever-longer ranges, while some are expanding production facilities in a bid to lower costs.
Tesla was no overnight success in China—far from it. Tesla entered the Chinese market in 2014, and struggled for several years. Now, however, its brand is firmly established, and the cost savings unleased by the Shanghai Gigafactory have allowed it to bring its prices into line with domestic alternatives.
“Competition is getting heated, but Tesla enjoys an overwhelming advantage,” Chen Jinzhu, CEO of Shanghai Mingliang Auto Service, told the SCMP. “The grim reality is that Chinese drivers would choose Tesla now, as the cars are priced attractively.”
 |
“Tesla, as the most established [new energy vehicle] brand worldwide with the most mature technology, is ratcheting up pressure on the Chinese rivals,” said Yale Zhang of researcher firm Automotive Foresight. “It is not an easy job to unseat it from the leading position.”
In April, Tesla lowered the starting price of a Shanghai-built Model 3 to 271,550 yuan ($39,500). Some competing models are cheaper—Xpeng’s P7 sedan starts at 229,900 yuan—but for many car buyers, the price difference isn’t enough to offset Tesla’s performance and prestige advantages.
“We will choose a domestic brand NEV only if it is priced at least 30 per cent lower than Tesla,” potential car buyer Chen Yong told the SCMP. “Some of the Chinese models do have longer range or more advanced digital technology than Tesla cars, but those advantages are not enough to convince me that their products are superior.”
Two Chinese startups that are already selling EVs recently raised piles of cash in US IPOs. Five-year-old firm Li Auto has sold 10,400 units of its Li ONE SUV. Guangzhou-based Xpeng launched its G3 SUV in December 2018, and followed it with the P7 sports sedan this April. These aspirants, along with established industry players, are expected to invest heavily to try to establish economies of scale and undercut Tesla’s prices.
“The startups that are now flush with funds will expand production capacity to lower prices, giving them scope to cut prices and compete with Tesla,” said Gao Shen, a Shanghai-based independent analyst covering the manufacturing sector.
Above: A look at production of Tesla’s Model 3 fleet in China at the company’s Gigafactory in Shanghai (YouTube: MDx Media via Tesla China)
Tesla isn’t standing still though. The SCMP reported that Tesla’s made-in-China Model Y launch was “imminent” and expectations are high. “Based on its prices, Model Y is set to grab share from the existing domestic premium electric vehicle builders,” notes Shen. “The new Model Y will be a stern challenge to the Chinese rivals.”
