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The media rushed to cover Tesla's announcement of a manufacturing plant in China yesterday, but, as d & rsquo; usual, the major details have been ignored: pay for it? Who will buy the cars?
With a projected capacity of 500,000 units in 4-5 years after the ground is broken and no local partners, however, Tesla takes a big risk in hiring capital into a market in which the company is a simple niche player. The question of which entity will eventually commit the capital is relevant, since Tesla's huge cash and balance sheet make such an expense impossible as it is currently built.
Will Panasonic come to the rescue and fund the Lingang factory, already known as Gigafactory 3, just as it financed the construction of Gigafactory 1 in Nevada and Gigafactory 2 in the north of 39, State of New York? The Chinese tech giant Tencent Holdings, which took a 5% stake in Tesla in March 2017, will it provide fresh capital for Tesla's Chinese adventure? I do not know the answer to these questions, but it is clear from my analysis that Tesla can not fund the construction of an additional assembly plant from internal resources.
A Tesla Inc. logo is posted on a parking lot While the trade war threatens, one of the most powerful weapons of Chinese President Xi Jinping could be the boycott of American brands by the legion of consumers of his country. Photographer: Giulia Marchi / Bloomberg
According to the China Association of Automobile Manufacturers, Tesla ranked 11th in new energy vehicle sales in China in 2017, a market that totaled 1.2 million vehicles . Tesla recorded sales of 14,883 units in China in 2017, barely half of sales of the number 10, Geely, and not even 20% of the number one sales, BYD. Yes, these numbers include plug-in hybrids, which Tesla does not offer, but the preliminary results of 2018 show that Tesla is still behind because Chinese buyers have ripped out purely electric vehicles – battery-powered electric vehicles or BEVs – at the first half to obtain government grants.
My favorite source for new Chinese automobiles The automobile information portal of Gasgoo reported these figures today for BYD:
From January to June, sales of BYD NEV reached 71,270 units, up 106% earlier. The remarkable sales performance of NEV has made BYD China's largest automaker a production and sales exceeding 360,000 … Cumulative sales of electric vehicles (B) reached 23,840 units in the last six months, leaping 49% compared to the previous year.
So, that's what American investors need to understand. Tesla is by far the dominant BEV player in the United States, and I estimate their share of the purely electric BEV market in the United States to be an incredible 75%. Tesla's domestic competition for pure electric vehicles consists mainly of the Chevrolet Leaf and Nissan Leaf, two models that resemble the small three-compartment sedans that American buyers fell in love with 25 years ago
.
Models 3, X and S are BEV sales numbers 1, 2 and 3 in the United States, but Tesla does not even list the first 10 sales of purely electric vehicles in China according to Gasgoo & # 39; s [19659010] numbers. This list is populated with models I'm sure you've never heard of, including the Baojun E100, Emgrand EV and Roewe E50. But the real danger for Tesla is not tiny city cars with a small radius of action and few modern conveniences, it is the presence of BEV that are attractively designed and have interiors at the forefront of technology.
OEMs in China have wisely decided that in addition to selling BEV sedans, they should also pack electric powertrains with SUV-style crossover bodies that Americans love as much as Americans. This is an excellent decision, and newcomers like Byton with its M-Byte – expected in 2019 – and NIO, which began delivering its ES8 crossover at the end of June, will arrive at the market first with crosses.
Byton was founded by former BMW executives and is backed by Chinese auto giant FAW and recently colossusus battery IPO's CATL. The list of NIO inventors is a who's who of Asian tech giants, including Tencent, the Singaporean sovereign wealth fund Temasek and Baidu among others.
Thus, Tesla's huge lead in Western markets for high-end BEVs simply does not exist in China. Tesla is behind the curve on the largest BEV market in the world and the increase in tariffs on imported vehicles by 15 to 40% has pushed the company to raise prices on the S and X models. This rate has been reduced in May to 15% against 25%, but last week's increase to the punitive level of 40% shows how quickly firing can be fired in a trade war.
China is a difficult market to crack, and for a company that has a huge working capital deficit (Tesla's debts were more than four times its debts as of March 31) and a tent to complete the final assembly. As evidenced by the wave of executive departures in recent months, Elon Musk seems to want to do things on his own. But the Chinese market, which has flourished through so many East-West partnerships, is a very different animal, and Tesla just does not have the capital to compete.
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The media rushed to cover Tesla's announcement of a manufacturing plant in China yesterday, but, as usual, the main details were ignored, for example, which will pay for it? Who will buy the cars?
With a projected capacity of 500,000 units in 4-5 years after the ground is broken and no local partners, however, Tesla takes a big risk in hiring capital into a market in which the company is a simple niche player. The question of which entity will eventually commit the capital is relevant, since Tesla's huge cash and balance sheet make such an expense impossible as it is currently built.
Will Panasonic come to the rescue and fund the Lingang factory, already known as Gigafactory 3, just as it financed the construction of Gigafactory 1 in Nevada and Gigafactory 2 in the north of 39, State of New York? The Chinese tech giant Tencent Holdings, which took a 5% stake in Tesla in March 2017, will it provide fresh capital for Tesla's Chinese adventure? I do not know the answer to these questions, but it is clear from my analysis that Tesla can not fund the construction of an additional assembly plant from internal resources.
A Tesla Inc. logo is posted on a parking lot to load electric vehicles in Beijing, China on Saturday, July 7, 2018. While a commercial war threatens, one of the most President Xi Jinping's mighty might be the boycott of Americans. brands by the legion of consumers of his country. Photographer: Giulia Marchi / Bloomberg
According to the China Association of Automobile Manufacturers, Tesla ranked 11th in new energy vehicle sales in China in 2017, a market that totaled 1.2 million vehicles . Tesla recorded sales of 14,883 units in China in 2017, barely half of sales of the number 10, Geely, and not even 20% of the number one sales, BYD. Yes, these numbers include plug-in hybrids, which Tesla does not offer, but the preliminary results of 2018 show that Tesla is still behind because Chinese buyers have ripped out purely electric vehicles – battery-powered electric vehicles or BEVs – at the first half to obtain government grants.
My Favorite Source for Chinese New Cars, The Gasgoo Automotive Information Portal reported these figures today for BYD:
From January to June, BYD NEV sales reached 71,270 units, up 106% from the previous year. The remarkable sales performance of NEV has made BYD China's largest automaker a production and sales exceeding 360,000 … Cumulative sales of electric vehicles (B) reached 23,840 units in the last six months, leaping 49% compared to the previous year.
So, that's what American investors need to understand. Tesla is by far the dominant BEV player in the United States, and I estimate their share of the purely electric BEV market in the United States to be an incredible 75%. Tesla's domestic competition for pure electric vehicles consists mainly of the Chevrolet Leaf and Nissan Leaf, two models that resemble the small three-compartment sedans that American buyers fell in love with 25 years ago
.
Models 3, X and S are BEV sales numbers 1, 2 and 3 in the United States, but Tesla does not even list the first 10 sales of purely electric vehicles in China according to Gasgoo & # 39; s [19659010] numbers. This list is populated with models I'm sure you've never heard of, including the Baojun E100, Emgrand EV and Roewe E50. But the real danger for Tesla is not tiny city cars with a small radius of action and few modern conveniences, it is the presence of BEV that are attractively designed and have interiors at the forefront of technology.
OEMs in China have wisely decided that in addition to selling BEV sedans, they should also pack electric powertrains with SUV-style crossover bodies that Americans love as much as Americans. This is an excellent decision, and newcomers like Byton with its M-Byte – expected in 2019 – and NIO, which began delivering its ES8 crossover at the end of June, will arrive at the market first with crosses.
Byton was founded by former BMW executives and is backed by Chinese auto giant FAW and recently colossusus battery IPO's CATL. The list of NIO inventors is a who's who of Asian tech giants, including Tencent, the Singaporean sovereign wealth fund Temasek and Baidu among others.
Thus, Tesla's huge lead in Western markets for high-end BEVs simply does not exist in China. Tesla is behind the curve on the largest BEV market in the world and the increase in tariffs on imported vehicles by 15 to 40% has pushed the company to raise prices on the S and X models. This rate has been reduced in May to 15% against 25%, but last week's increase to the punitive level of 40% shows how quickly firing can be fired in a trade war.
China is a difficult market to crack, and for a company that has a huge working capital deficit (Tesla's debts were more than four times its debts as of March 31) and a tent to complete the final assembly. As evidenced by the wave of executive departures in recent months, Elon Musk seems to want to do things on his own. But the Chinese market, which has flourished through so many East-West partnerships, is a very different animal, and Tesla just does not have the capital to compete.
