Will Tesla Achieve Success In China?

Tesla has been experiencing challenges in China due to many issues, including tax breaks that favor domestic manufacturers, complex local license-plate laws, a lack of charging stations and a slew of domestic copycats.

Although these issues are expected when a U.S. technology startup expands into China, they hit Tesla especially hard, with the company selling only 3,500 cars in the country in 2014 and cutting an estimated 30 percent of its Chinese workforce in March of this year.

However, since that time, it appears the luxury automaker may be making some positive moves. Tesla CEO, Elon Musk, has announced plans to open the first Tesla manufacturing facility in China, which could cut the price of its Model S by more than one-third. Additionally, the company is seeking out Chinese manufacturing partners and attempting to streamline Beijing’s complex license-plate lottery for buyers of its vehicles.

While these moves illustrate the potential for a more successful 2016 in China, to achieve its goal of becoming the top electric car company in the world, Tesla’s success in China is essential. The country is currently the biggest auto market in the world, with almost 20 million cars sold each year, and the Chinese government is striving to have 5 million electric cars on its roads by 2020.

One of the many difficulties when introducing electric cars into the Chinese market is the fact that the country doesn’t own a large platform of charging stations. To meet the needs of consumers who want to take long road trips in its electric cars and want to use them in cities that lack the necessary number of charging stations, Tesla is developing a graphene battery that would be able to power the car for 500 miles. This would mark a substantial improvement from the current 300 mile range of its Model S vehicle, however, it is yet to be seen when this will come to fruition.

Tesla is clearly working diligently to achieve success in the massive Chinese market, and the company appears confident in its future growth.

“In the long term, we will probably see equal or higher sales in China than in the United States,” said Elon Musk in October. “That may take five or six years. We are trying to put localized production in China. In the years to come, you’ll see some fairly significant partnership announcements. If you look at China’s fundamentals over the long term, they are extremely good.”

Tesla is expected to face increasing competition for talent from other electric and autonomous carmakers, including Chinese-backed Faraday Future, Karma Automotive, Atieva and others. Musk has stated his belief that electric cars won’t succeed if one company dominates the market, and he has chosen to open-source Tesla’s technology to foster competitors to expand the market. However, the company will have to contend with that competition in the future.

It’s not clear whether or not Tesla will become dominant in the Chinese electric car market. The company does have a key advantage with its reputation for technological innovation and excellence, which could greatly help it win the race to offer more affordable and reliable electric cars in the future. At the same time, there continue to be many challenges to overcome. We’ll be watching this story closely in the new year as it develops.