In April, China announced that it will ease up on restrictions for automakers importing cars into the country. This has tremendous implications on country’s electric vehicle market.
China’s current electric climate:
Currently, foreign automakers that want to sell their cars in China have to pay a 25 per cent import tariff. The other option is to build a factory in China, but they can only own 50 per cent of the factory, while a domestic firm must own the other 50 per cent.
Tesla’s problem with China:
Tesla has been vocal in their China’s stipulations, which means that they may gain most from these potential changes. Currently, Tesla does not have a manufacturing presence in China.
Timeline for proposed changes:
The 50 per cent factory ownership restrictions will be relaxed in 2020 for non-electric commercial vehicle manufacturers. Restrictions for non-electric passenger vehicle manufacturers will start in 2022.
The implications of this are huge. The Wall Street Journal suggests that China’s sudden move to ease vehicle restrictions reflects efforts to defuse trade tensions with the US. Sources at the journal also spoke to insiders who said the move might not potentially change much for entrenched US companies that are already committed to China’s rules about joint ownership with its state-owned companies.
Essentially, if they already have a presence in China under the stipulations of joint-ownership, it’s likely that things wont change for them despite these new provisions. GM, for example, has a 14 per cent market share in China and 10 joint ventures with domestic Chinese companies.
Too early?
This move might come too soon for GM and Tesla, as well as other competitors that are using significant resources to develop the newest level of electric cars. China is a hard market to break into, and to sustain demands in.
For automakers, it’s a massive market to break into because of its culture of vehicles. But once automakers are there, they have strict timelines to increase electric vehicle sales. According to comments made by Xin Guobin, China’s vice minister of industry and information technology, the country even has a timetable for completely banning gas and diesel vehicles.
China dominates electric vehicle sales:
Despite no commitments to van gas and diesel, China superseded the US in electric vehicle adoption in 2016. In the same year alone, 40 per cent of the electric vehicles sold worldwide were sold in China. This figure excludes 200 million electric two-wheelers, more than 300,000 electric buses, and 3 to 4 million low-speed electric vehicles.
Tesla has been trying to find a way into China without having to give up 50 per cent f their factory ownership. In fact, the company was rumoured to have made a deal to open a factory in Shanghai’s free trade zone. The company insisted on maintaining full ownership of the factory, meaning that it would have paid a 25 per cent tariff on imports.
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