Tesla’s dominant EV position in China could be threatened in 2021

Waiting in the wings for Tesla is the Model Y, which Musk says has the potential to outsell all other vehicles it makes. The crossover is already being built in California, and a Shanghai-assembled version is clearing the final regulatory stages to start selling in China as soon as next year. Earlier in December, drone footage captured around 40 Model Y vehicles being driven out of the factory and wrapped in protective covers.

“China will continue to fuel Tesla’s global growth in 2021, more so than ever,” Sharon Li, a JL Warren analyst, said in a recent note.

The carmaker is also expanding its geographic footprint, recently opening multiple Tesla centers in China’s lower-tier cities including Weifang and Linyi in northeastern Shandong province. Meanwhile, it’s bolstering its public and government relations teams in smaller hubs including Shijiazhuang and Haikou, in addition to larger cities.

Tesla is starting local production of chargers in Shanghai too, part of an effort to expand its charging network in more cities. The company recently completed its 500th super-charging station, marching toward an annual target of 650.

The China Passenger Car Association predicts that Tesla will sell as many as 280,000 vehicles in the country next year. While that represents impressive growth over 2020, it would still leave more than 80 percent of the market up for grabs. PCA predicts total sales of 1.7 million new energy vehicles for 2021.

That means local premium brands Nio, Xpeng and Li are increasingly a threat — combined, the three companies already approach Tesla’s monthly sales tally. SAIC-GM Wuling Automobile Co. and BYD Co., which sell less expensive electric cars, are also gaining momentum.

Nio, the biggest of the Chinese trio, has steadily boosted sales of its electric SUVs that it sells at a price as much as 40 percent higher than Tesla’s Model 3. The company’s retail strategy includes clubhouses with showrooms, lounges, work spaces, theaters and even camp activities for customers’ children. A Tesla price cut earlier in the year added some pressure, but a subsequent reduction failed to have a similar impact, Nio CEO William Li said on a recent earnings call.

“We didn’t see any specific impact on our order intake,” Li said. “This proves that we have our own unique advantages.”

Xpeng similarly has seen brisk sales growth, helped by lower prices than Tesla’s. The company, which touts the smart features of its vehicles, raised $2.2 billion this month selling additional stock, capitalizing on a recent share-price surge.

“I would call 2020 Year One of an intelligent electric-vehicle market in China,” Xpeng Vice Chairman Brian Gu said in a phone interview on Nov. 27. “We’re seeing really good sales of many good products.”

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