Why Tesla thrives in China during the US-Sino trade war?

By Tom McGregor

The US-based electric vehicle (EV) maker Tesla has deep ties with the Chinese market and they opened up a gigafactory in Shanghai last December with much fan-fair.

The Chinese government has also offered generous tax credits and subsidies for EV buyers, since Chinese cities stand eager to curtail pollution. Local officials have already imposed stringent driving regulations to curtail traffic jams and lower carbon emissions.

New energy vehicles, such as the Tesla Model 3, are electric battery operated and run at zero emissions. Accordingly, Beijing has plenty of incentives to promote Tesla and to create more factory jobs in the country.

Let's review Beijing's policy on EV purchases. China's Ministry of Finance and Ministry of Industry announced on April 23, 2020 that new energy vehicles will continue to be exempt from a 10 percent vehicle purchase tax from January 1, 2021 to December 2022.

Drivers can be eligible for a subsidy as well. As of July 2019, a RMB25,000 subsidy was offered to China's EV consumers. Due to the COVID-19 pandemic, the subsidy will stay in place but at 10 percent lower starting April 2020. To obtain a subsidy, the EV has to have a driving range of 400-km with a one-time charge.

Therefore Tesla has played it very smart to expand its manufacturing, supply chains and direct sales in China. The Tesla Shanghai factory is manufacturing Model 3 sedans and has returned to normal production levels amid the coronavirus outbreak.

Meanwhile, Tesla's Model 3 sedans remain a popular EV for Chinese drivers, selling over 11,000 units in March 2020 alone and more than 16,000 units from January to March this year.

Tesla has updated its official Website to announce the Tesla Model 3 Long Range and Model 3 Performance variants are all under production at the assembly line in Shanghai. Tesla's strong sales performance indicates how American companies can become very successful in the country.

The automaker's founder Elon Musk has long championed vibrant business ties with China. He has been a frequent visitor to the nation, stayed positive and takes a more hands-on approach to connect with Chinese consumers.

Meanwhile, China-based EV companies have opened up factories in the United States. BYD has a plant to build EV buses in Lancaster, CA. The company disclosed they manufactured its 400th bus on their California assembly line as of last December.

BYD stands for "Build your dreams" and invested over US$250 million in 2018 alone into the North American markets, including $70 million for components and services from American vendors.

BYD has pursued the American dream by manufacturing buses in California, while Tesla has chased after the Chinese dream with a gigafactory in Shanghai. The two companies serve as business-oriented bridge-builders for both great nations.

Chinese and American companies can work closer together and when they do that can narrow the gaps of cross-cultural misunderstandings.

(The views don't necessarily represent those of the CCTV.com.)