Catfish effect

Green cars have seen rapid growth in China in the past decade, with sales rising from fewer than 10,000 in 2009 to more than 1.26 million in 2018. But the industry is also seeing challenges as the government slashes subsidies and foreign brands like Tesla make inroads into China with their factories.

"Tesla's China production will have a 'catfish effect' in the country's auto industry, pushing domestic carmakers to speed up technological upgrading," said Cui Dongshu, secretary-general of the China Passenger Car Association.

Yang Yang, who works in Shanghai, has considered changing his car recently. After comparing many petrol-powered vehicles and new energy vehicles (NEVs), he opted for a domestically made Tesla Model 3.

"The price is acceptable and the car has a relatively long driving range, which meets all my needs," Yang said.

Prior to the made-in-China Model 3 cars, the price of an imported Tesla Model 3 vehicle stood above 439,900 yuan (about 63,069 U.S. dollars) in the Chinese market. The price tag of the Shanghai-made sedans, however, starts at 323,800 yuan.

As a benchmark for NEVs, the Model 3 will help drive the innovation and upgrading of domestic suppliers, according to a report by Minsheng Securities.

Besides Tesla, more luxury car brands have made plans to produce NEVs in 2020. The foreign-made NEV cars will compete on equal footing with Chinese automakers, as China is scheduled to eliminate government subsidies for NEVs this year.

"Though the NEV market is now dominated by local brands, with new forces joining in, China's new energy automobile market will enter an era of fierce competition after 2020," said Mou Jiawen, consulting director of Deloitte Auto.

Beneficiary of opening up

As the first project after China lifted restrictions on foreign investment in the auto industry, Tesla's Shanghai gigafactory shows that China, with continued efforts in reform and opening-up, still tops the list of investment destinations for foreign firms.

The country has in recent years significantly eased market access for foreign capital, vowing to further open up the market with new laws and regulations to support their investment.

Data from the Ministry of Commerce showed that foreign direct investment expanded 6 percent year on year to 845.9 billion yuan on the Chinese mainland in the first 11 months of 2019, and China attracted 722 foreign-funded projects, with each worth more than 100 million U.S. dollars, during the same period, an increase of 15.5 percent from a year ago. 

Related

Go to Forum >>0 Comment(s)