Published on March 31st, 2020 | by Carolyn Fortuna0
Can Tesla Salvage China’s EV Market Post COVID-19?
March 31st, 2020 by Carolyn Fortuna
In China, policy, technology, and money go hand in hand. The coronavirus hit China hard at a time when slowing sales had already illuminated the country’s broader economic problems, spurred on by rising debt, the US–China trade war, and a resulting drop in consumer buying power. Many industry insiders are forecasting that, in 2020, big ticket items like electric vehicles will be among the sectors of the Chinese economy hit hardest.
That is, unless Tesla can salvage China’s EV market.
In contrast to the 2008 financial market crash, the 2020 corporate sector has been pervasively affected, and the impact continues to rise due to the high level of interconnectedness of manufacturing and distribution around the world. A March 2020 report from the Leibniz Institute for Financial Research suggests the virus epidemic “carries the risk of a financial pandemic, a form of systemic risk.”
As example, China’s post-COVID 19 EV sales in February were affected by weak consumption performance as market demands were largely restrained. Without doubt, February sales are sure to have a significant impact on the performance of China’s overall automotive market in the first half of 2020.
Can Tesla’s vigorous return to the Chinese EV marketplace after a brief shutdown of its Shanghai plant help to sustain what had been strong national EV momentum?
EV Incentives Cut, Demand Dropped — And Then Came COVID-19
Once EVs caught on in the automotive marketplace, China withdrew approximately half of its financial incentives for buyers. Most of those incentive cuts targeted short-range EVs — cars that can travel 100 miles (160 km) at the outset on a single battery charge. An EV sales slump followed. BAIC seemed to stay dominant in 2019, with its EU-Series outselling any other electric car, with more than 100,000 sales in the year.
In the last quarter of 2019, though, the coronavirus caused an unexpected plummet in the Chinese EV market. Manufacturers halted production, dealerships closed, and, overall, the transportation sector froze. To date, the coronavirus has killed 3,300+ people in China, nearly 3,200 of those deaths in the Hubei province that is home to Wuhan.
February 2020’s China EV sales numbers compared with the same month in 2019 were down 65%, according to a CleanTechnica sales report. Sales of new energy vehicles (NEVs) fell for the 8th month in a row. Only 15,000 passenger EVs registered in February, the worst result in over 3 years, representing a 65% drop year over year.
Tesla’s Model 3 was at the top of China’s battery electric vehicle (BEV) production charts in January, according to figures released by MIIT. The 2,625 units put the Model 3 some 12.5% ahead of any rivals. Then Telsa delivered 2,284 units in February in China. With the backdrop of the pandemic, those are strong numbers, indeed, offering optimism as to what is to come for Tesla in the China EV marketplace.
Tesla is just the company that can give China’s car market a much-needed boost of energy right now. Tesla’s impressive progress in China isn’t something that will likely be halted by the coronavirus. For one thing, the company is only at the beginning of its production life in Shanghai. That means adjustments are constant and expected. The Gigafactory 3 (aka Giga Shanghai) operations are more flexible than most at this point.
Moreover, many Chinese companies, with the encouragement of Chinese authorities, began transitioning large portions of their non-manufacturing workforce to telecommuting after the end of the Chinese New Year, in late January. Tesla’s customers are already accustomed to ordering online, so no shifted expectations or slowdown during a technological learning curve need to occur when Chinese consumers consider a Tesla for their next EV purchase.
These and other Tesla financial practices already in place promote products and services within a model of day-to day activities that confer reliability and potency in unstable times.
EV vs. ICE in China? That’s an Easy One
Government restrictions on the number of internal combustion engine (ICE) cars sold each year mean people in China have to enter a lottery or auction to be able to buy an ICE vehicle. There’s no waiting in line for an EV.
China’s EV market is the largest in the world. In 2018, more than a million electric vehicles were sold in China, more than 3 times the number sold in the US. In 2019, the figure was 1,177,421, according to data provided to CleanTechnica by EV Volumes, again approximately triple the US total. Beijing invested an estimated $50 billion in the EV industry, envisioning the inevitable consumer demand for EVs that many companies and countries could not. Over the last 3 years, the number of Chinese electric vehicle manufacturers tripled to more than 400 registered nationwide. At the end of December, 2019, BEVs represented 86% of registrations.
Electric cars seemed to be the Way. And they can be again, with the allure of Tesla models leading the pack. Tesla built its enormous Shanghai factory in a conscious effort to grow its business through manufacturing within a forceful marketplace and has the savvy to target Chinese consumers better than any other car company, on the ground in China or abroad. In these uncertain economic times, Tesla is revealing itself as more than a technological leader and aesthetic pleasure. Public disclosure, stock regulation and accounting choices as a publicly traded company, and a helpful consumer base make Tesla well placed in China during turbulent financial times.
Tesla is much more than an electric car company. Its origins lie in a quest to build a sustainable future for the planet. Yes, Tesla has exciting technological innovations within Tesla’s all-electric car catalog as well as supporting networks of Superchargers and Gigafactories. At a time when many of China’s new energy vehicle companies are seen as raw, untried, more R&D than mass manufacturing focused, Tesla can deploy enormous volumes of clean energy vehicles. Further, Tesla Energy is another feather in a wide-ranging technological cap. Solar power, energy storage systems large and small — Tesla offers an ecosystem approach to the clean energy revolution, as does China.
Those ingredients, accompanied by overt public support from the Chinese government for Tesla’s viability, blend into an EV partnership that offers social sustainability through corporate culture behaviors and practices.