Is Tesla's factory in China a business opportunity or a challenge for Chinese power battery companies?

　　In the past few days, the Wall Street Journal from across the ocean has made a big news. Once the news broke, it occupied an important position in the media and self-media of China's new energy industry circle and continued to spread. Let's follow the automotive electronics editor to learn about the relevant content.

　　The Wall Street Journal said that the Chinese government has reached an agreement with Tesla to build a factory in the Shanghai Free Trade Zone. According to analysis by Chinese self-media, Tesla is very likely to build a wholly-owned factory in the Shanghai Free Trade Zone.

　　As soon as the news came out, it dropped another depth bomb on the already turbulent Chinese new energy vehicle industry circle. The huge energy brought countless reflections to the industry - Tesla is here, is there still room for Chinese new energy vehicle companies?

　　It is reported that Tesla's settlement in the Shanghai Free Trade Zone also means that its products will still be subject to a tariff of about 25% and will be treated as imported products. But even so, for the automotive industry, Tesla's sole proprietorship is the first time in history, because our country's industrial policy only approves joint ventures and does not allow the existence of sole proprietorships. This time, it can be said that Tesla has bypassed the barriers of national policies and independently stood in China, the world's most important and even largest market.

Is Tesla's factory in China a business opportunity or a challenge for Chinese power battery companies?

　　Some people also joked that Tesla was able to be wholly owned in China because of the strong support of US President Trump, which seemed to impose a little bit of "political will" on a market behavior. Trump's public relations were quite effective and facilitated the landing of Tesla in China.

　　Putting aside this gimmick, if Tesla really comes, what can it bring to Chinese local car companies and even joint venture new energy car companies?

　　Since entering 2017, China's new energy vehicle industry has ushered in a wave of joint ventures: BMW and Brilliance Auto have jointly established forces; Daimler and BAIC have formed a marriage; Volkswagen and JAC have embraced each other; Ford and Zotye have slept together... Traditional giants in the automotive industry have all entered the Chinese market in the form of joint ventures.

　　But compared with traditional car companies, Tesla is a complete alternative because it does not have the burden of fuel vehicles and started directly from electric vehicles.

Is Tesla's factory in China a business opportunity or a challenge for Chinese power battery companies?

　　In the industry, everyone knows that Tesla has complete core technologies for pure electric vehicles, starting with the core battery, then PACK assembly, BMS battery management, and then motors and electronic controls, all of which are world-class. Tesla has a lithium battery super factory in the United States, with a production capacity of 35GWH by 2018. As for the 21700 nickel-cobalt-aluminum battery cell used in Model 3, it has once again led the world trend, seducing battery companies around the world, especially China, to follow in Tesla's footsteps and begin large-scale layout.

　　Some experts say that Tesla is a BMS management system company, which is true. Tesla is the world leader in this regard. It is Tesla that can make seven or eight thousand independent battery cells in a car produce consistent sounds. Of course, there is also leading PACK technology.

　　Putting these things aside, Tesla's artificial intelligence autonomous driving technology can be said to be unmatched by any company in the world. Autonomous driving has been applied since the Model X, and it is even more perfect on the Model 3.

　　No company in China can compare with Tesla in terms of battery, management system, or autonomous driving. Some experts say that in terms of power lithium batteries, China still has a huge gap with Tesla in terms of specific energy, battery consistency, and management system.

 Is Tesla's factory in China a business opportunity or a challenge for Chinese power battery companies?

　　It is also revealed that Tesla is also an application of silicon-carbon negative electrodes for lithium batteries. In our country, this negative electrode material is still in the experimental stage and has not yet reached application and mass production.

　　The most sensitive issue is the price. Tesla has always been a luxury car in the minds of Chinese people. A Model X costs hundreds of thousands of dollars, which is unaffordable for ordinary people and is a toy for the rich. Take the price of Model 3 in the United States, which is $35,000. According to the exchange rate of 1 to 6.8, it is equivalent to RMB 238,000. If Tesla can build a factory in China and launch it at this price, it will undoubtedly be a death notice for Chinese new energy car companies. Because domestic car companies do not have a competitive advantage in terms of price.

　　In addition, from the brand point of view, Tesla is a world-class brand, and in the minds of consumers, it is no less than BMW, Mercedes-Benz and other cars. In terms of brand influence, our car companies are also inferior.

　　From technology to price to brand, what can our country's car companies do?

 Is Tesla's factory in China a business opportunity or a challenge for Chinese power battery companies?

　　After Tesla achieves localization, the cost of automobile production will continue to decline. Some experts say there is room for it to drop by one third.

　　First of all, Tesla has already tasted the sweetness in this huge Chinese new energy market. Tesla's sales in China reached US$319 million in 2015, and in early March this year, it was announced that the company's car sales in China in 2016 reached US$1 billion, accounting for 15% of total sales. The Chinese government hopes that the annual sales of new energy vehicles will reach 7 million units by 2025. Tesla still has enough room for growth here.

　　Of course, this is not unlimited, because he needs to pay high taxes, including import tariffs and value-added tax. Tesla's selling price in China is about 50% higher than that in the United States, and sooner or later it will encounter sales bottlenecks due to higher costs in the future.

　　Secondly, Tesla can significantly reduce supply chain costs in China, which makes him willing to accept the "25% import tariff". Although there are few Chinese companies in the core first-tier suppliers of the "three-electric system" and other core suppliers in Tesla's supply chain system, Chinese companies account for about half of all the more than 100 Tesla suppliers after indirect suppliers of chassis, body, central control system and other components. Of course, most of them enter this system as second-tier raw material suppliers.

　　For example, Tesla's lithium battery manufacturer is Japan's Panasonic, while the suppliers of raw materials such as nickel, cobalt, and aluminum are Chinese companies such as Shanshan Holdings, Luoyang Molybdenum Co., Ltd., Hanrui Cobalt Co., Ltd., and GEM Co., Ltd. China Minmetals Capital provides Panasonic with precursors, and graphite comes from China Baoan's subsidiary B&T Battery Co., Ltd., etc.

　　Therefore, relying on these more localized underlying supply chains and re-screening some supply chain partners in China can save Tesla huge costs. According to relevant personnel from a domestic car manufacturer, this can save Tesla at least 20% of its supply chain costs.

　　Of course, in the end, the imported spare parts storage center to be established in the future and a series of convenient supporting policies in the Shanghai Free Trade Pilot Zone will bring many benefits to Tesla.

　　Tesla has really come, not only bringing affordable good cars to China, but also bringing endless thinking to China's new energy vehicle industry. To become bigger and stronger, we must learn from industry leaders.

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