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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Tesla’s China Gamble Is Paying Off

Over the last several years, China has slowly but surely taken over the global electric vehicles industry. The country has indirectly controlled EV markets for years through their near-monopolization of lithium-ion battery production, producing about two-thirds of the world’s supply of this crucial EV component that represents a staggering 40 percent of an electric car’s value.  With so many individual EV components manufactured in China, it makes sense that many foreign car companies are shifting their entire production operations to Asia. but instead of enjoying an EV boom, Chinese-owned EV companies are struggling to get off the ground in their own country. One reason for this is intense competition from foreign companies. One of which is, of course, the ubiquitous Tesla. Tesla is not just pushing into Chinese manufacturing sectors, it’s pushing into Chinese markets, and it’s wreaking havoc for local companies.

“Tesla Inc.’s new Shanghai plant has churned out super-popular Model 3 electric sedans for the past six months, catapulting the company atop the sales chart and piling the pressure on cash-strapped local rivals,” Bloomberg reported last week. Just this month China’s Byton Ltd. announced that it will be taking a six-month hiatus and furloughing its employees. The business attributed this announcement to economic difficulties due to the novel coronavirus pandemic, but it’s the third Chinese EV company to bite the dust “since Elon Musk started his made-in-China offensive.”

Byton Ltd., a high-profile Chinese startup with big ambitions to enter the United States market, began its six-month break on July 1. The company followed in the footsteps of another two “sizable” Chinese EV companies, Bordrin Motors and Jiangsu Saleen Automotive Technology Co., who also shuttered their business this year as they “fell victim to plummeting demand amid the trade war and coronavirus pandemic, and as the government scaled back the subsidies that turned China into the world’s biggest EV market with hundreds of producers.” Related: Chinese Oil Imports Surged In H1 2020 Despite COVID-19

While the Chinese EV market has been diminishing, however, Tesla’s presence in the country’s market has only grown. “Tesla, in just half a year, grabbed a hefty slice of that shrinking pie — and its portion keeps getting bigger,” writes Bloomberg.  “The market leader’s sales now approach a quarter of the total tally for EVs, the China Passenger Car Association said July 8, as wealthier buyers are drawn to Tesla’s brand cachet. That’s making life difficult for the slew of local contenders and risks exposing the multibillion-dollar Chinese EV push as a bubble.”

While Tesla edges out Chinese companies in China, they’re also poised to revolutionize the global EV industry and expand their empire with a revolutionary disruption to the sector. As always with EV, it’s all about the batteries. Tesla is developing an ultra-durable car battery with a million-mile longevity and the ability to power a car for 400 miles between charges. This battery will not be the standard lithium ion battery, but lithium iron. Even more ambitiously, Tesla is also planning on finding a way to ditch cobalt--a hugely pricey component that significantly drives up the cost of electric cars. 

Not only will this catapult Tesla’s EV sales, it’s not hyperbole to say that this development will fundamentally change the global car market on the whole, as these million-mile batteries will have such a long lifespan that vehicles will be able to retain their value for much longer. “If you’re talking about batteries that can last twice as long for the same price, it completely changes the math for the consumer,” Wedbush Securities analyst Dan Ives told CNN

All this is to say, X Æ A-Xii’s trust fund is about to get a whole lot bigger.

By Haley Zaremba for Oilprice.com 

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