HOW CHINA'S AUTOMOTIVE FUTURE WILL DRIVE THE WORLD

THE INEVITABLE

MIKE FLOYD

Michael Dunne can pinpoint the moment when the Chinese auto industry's electric vehicle revolution began in earnest, and credit is due the same company that spurred a similar EV awakening in America.

Ever since Tesla got there in January 2020, we've seen an explosion of demand for electric vehicles, says Dunne, a 30-year Chinese market specialist and the CEO of ZoZo Go, a San Diego-based consultancy that advises automakers and other industries on Asia. For the first time, here comes a product that really checks all the boxes. It's aspirational, it's attractive, it's high tech, it's exclusive, and you have affluent, educated urbanites in Shanghai, Beijing, Guangzhou, Shenzhen, and the big cities on the coast saying, 'Yes, we want one.

According to Dunne, it led to a Tesla effect, a surge in interest in domestic Chinese automakers who were producing EVs-companies such as Nio, Xpeng, and Li Auto-with similar technology and attractive designs at a slightly lower cost. When interest in Tesla spiked, suddenly those companies and others saw sales and stock prices soar.

The numbers from the China Association of Automobile Manufacturers (CAAM) bear it out. CAAM estimates sales of new electric vehicles in China (NEVs include plug-in hybrid, all-electric, and hydrogen fuel cell vehicles) should hit some 3 million units by the end of 2021, more than double the number from 2020. In the first nine months of 2021, that equated to around 11.6 percent of the overall Chinese domestic market.

As for Tesla, while it's benefited from the initial hype surrounding its vehicles, it also received a fair bit of help getting to its position of EV dominance in China. It garnered substantial assistance from the Chinese government to get its Shanghai facility, known as Tesla Giga Shanghai, off the ground, and it is the only foreign automaker to date that wasn't forced to partner with a Chinese counterpart. According to the Ministry of Industry and Information Technology of China, Tesla also received the highest subsidies on its vehicles of any NEV automaker in 2020. It's the type of white-glove treatment foreign automakers have rarely-if ever-received.