Weekly brief: China’s EV Bonanza a Magnet for Foreign Carmakers

Tesla is headed East. After a year mired in production delays at its Fremont, California, Gigafactory, the electric carmaker announced last week that it has secured 212.5 acres of land in Shanghai for a new Gigafactory, its first outside the US.

This Chinese plant will be large enough to produce battery packs and to assemble vehicles under one roof – an important step for manufacturing efficiencies. Tesla claims that the factory will enable it to double its global production. As an added bonus, it also will allow the carmaker to avoid tariffs on its EVs destined for the Chinese market, which is a big deal given our escalating trade war with China.

A couple days after the Tesla announcement, Volkswagen revealed that it, too, is set to open a mass production site for electric vehicles near Shanghai, as my colleague Greg Hyde reported. The site will be VW’s first factory dedicated exclusively to manufacturing EVs, and it will be the launch site for the company’s new modular electric drive kit that it unveiled in September.

The new VW and Tesla factories are just the latest sign of China’s rise to the top of the EV market. The country now ranks as the largest producer and consumer of EVs in the world. We’re not just talking about volume here, either. The sheer range of EVs available in China boggles the mind. If you’re interested in an EV in the US, you might have 10 or 15 models to choose from. In China, you’ve got more than 75. The vast majority of these – 96% as of 2018 – are built by Chinese carmakers, the largest of them BYD, ZhiDou, Zotye and then the state-backed Beijing Electric Vehicle Corp and Shanghai Auto.

Most of them are doing well, too. Sales for EVs and plug-in hybrids in China climbed more than 50% in September alone and are on track to be up 100% from 2017 to 2018, according to the China Association of Automobile Manufacturers. This despite the fact that overall car sales in China plummeted in September, more than at any other time in the last seven years, and it’s looking like China’s auto market could contract in 2018, a first since last century.

What explains it? Subsidies and other favorable policies, for one. Pollution has become so bad in cities like Shanghai and Beijing that the government has made it difficult to buy new cars with internal combustion engines. People have to enter license-plate lotteries and pay hefty registration fees if their number happens to be drawn. Not so if they want to buy an EV, however, as the government will give them a pass on the lottery and the associated fees.

Another factor is that China has been cranking up its EV charging infrastructure over the last five years at a rate that few other countries can match. In 2016 its charging infrastructure grew 118% according to a study by McKinsey, which helps to reduce range anxiety and up the appeal of driving EVs outside of urban environments.

Put that all together, in combination with the world’s largest population at 1.42 billion people, and you have all the requisite ingredients for an EV explosion. No wonder the likes of Tesla and VW are clamoring for local footholds.


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