Tesla is entering China with a new subsidiary in Shanghai 05-31-2018

On May 10, 2018, Tesla was approved to establish a subsidiary in Shanghai. According to CCM, the future facility will surely speed up localisation in the Chinese market.



 


On May 10, 2018, the world’s largest clean-energy vehicles producer Tesla's has announced that a fully owned subsidiary called Tesla Shanghai with a registered capital of USD15.71 million and shareholder being Tesla Motors Hong Kong Limited is established, according to the National Enterprise Credit Information Publicity System. Tesla Shanghai is mainly involved in the technology development and transfer and technical services related to electric vehicle spare parts, battery, energy storage equipment and photovoltaic products, and the wholesale and imports & exports of the said products. 


Currently, due to the strict policies for car imports in China, Tesla’s cars are all subject to 25% import tariff. This obstacle is ought to be removed by establishing the own subsidiary in the Middle Kingdom. 


Elon Musk, CEO of Tesla, tried to get a company opened in China for quite some time already. However, since foreign companies could previously only open a branch in China when they partner up with a domestic enterprise, Tesla did not make the move. The company couldn’t agree on sharing the technology and intellectual property with the Chinese. This obstacle has now been removed, opening the path of Tesla into China. 


Most automakers have acquiesced to the joint venture rule and partnered up with Chinese manufacturers to skirt that import tax so that they can keep costs low for customers and access the market. 


Soon after the announcement of the new facility in Shanghai, Tesla’s hiring efforts started with the company’s official WeChat account posting job listings for a Tesla facility. 


Partnership with Panasonic

Additionally, Director Kazuhiro Tsuga of Japan-based Panasonic stated on May 11, 2018, that the company may partner with Tesla to produce batteries in China. This is the first time for Panasonic to admit the possibility to produce batteries for Tesla in China. Panasonic is the world's largest EV purpose Li-ion battery supplier. Now the Li-ion batteries for Tesla's EVs are all supplied by Panasonic. 


CCM is of the opinion that the establishment of Tesla Shanghai which has not yet been involved in the vehicle manufacturing, is an acceleration for Tesla to build its self-funded plant in China. This may introduce Panasonic's battery production system into China and may furthermore shock the Chinese power battery business. A deep phase-out may be carried out in the industry, and the industry transformation and upgrading may be sped up. Currently, the domestic Li-ion battery producers are technologically far behind the international giant players such as Panasonic and LG, regarding the key indicators such as energy density of battery and production cost.  



Now China is loosening its restriction on foreign shares in the manufacturing of alternative energy vehicle. That is to say, Tesla and Panasonic may build their plants in China. In future, the premium market may grow in an explosive way. This, together with the decreases in subsidy, are two big challenges to the traditional Li-ion battery makers who are poor in technology and supply chain. However, it is an opportunity to those in possession of upstream resources and advanced technology: they may upgrade their business, be geared with the world and seek for greater growth. 


However, some experts are of the opinion, that Tesla should not invest in an own factory in China yet and keep exporting for now. If the taxes for car imports are lowered further, as China’s President Xi Jinping recently hinted, it could be all the more reason to wait on going full throttle with production in China. 


Foreign car manufacturers in China

Facing enormous regulatory threats in the world's largest car market, international car manufacturers are looking for strategies for products and technology development to get ground in the competition for new energy cars in China. 

 

Ford China has recently announced to establish a joint venture with China’s Anhui Zoyte car enterprise to leverage the production and sales of electric passenger cars in the current largest market for alternative energy vehicles. The partnership will have a 50-50 stake and the new cars being built will be sold under a new local brand as well. The new company will mainly engage in the research, manufacture, sales and after-sale service of battery energy passenger cars. 


Germany’s car manufacturer giants Volkswagen and Daimler have both recently made agreements with Chinese enterprises to strengthen their presence in China’s AEV market and boost production of green cars. Also the Renault-Nissan Alliance announced it's forming a joint venture with Dongfeng Motor Group with the aim of developing and building plug-in electric cars specifically for the Chinese market. These steps reflect the rush of foreign enterprises to increase zero-emission car sales in China, as the country is getting strict regarding environmental protection. 


About the article

The information for this article comes from CCM, China’s leading market intelligence provider for the fields of agriculture, chemicals, energy, food and feed. 


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