Elon Musk’s Tesla will face a tough challenge from Chinese electric vehicle (EV) makers this year as they plan to launch new models. Tesla’s market value crossed $800 billion for the first time this week, making the American entrepreneur world’s richest person.
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Musk has reached the top spot by beating Amazon founder Jeff Bezos, who was holding the position since 2017. In 2020, Musk had hit another record as Tesla held a commanding position in the world’s biggest electric vehicle market – China.
While Tesla regularly topped monthly premium EV sales tallies, Chinese carmakers Nio and Xpeng Motors are set to challenge Tesla’s domination in the electric car market in 2021.
A report in Nikkei Asia says Nio, whose market value rose more than 12-fold during 2020, is launching its first flagship sedan equipped with the latest autonomous driving technologies on Saturday.
Another Chinese company Xpeng Motors has plans to launch a compact sedan this year, chairman and founder He Xiaopeng told Nikkei Asia. The media report speculated that launches will send the Chinese companies in direct competition with Tesla.
Tesla’s Share in the Chinese Market
Tesla had opened a multi-billion dollar plant in Shanghai in 2019 and has grabbed a large market share in China. It has helped lower its production costs and avoid import tariffs, resulting in low prices.
Tesla’s Model 3 was the country’s bestselling electric vehicle (EV) last year. Reports suggest that China’s sales helped Tesla deliver better results in 2020 when it delivered almost 500,000 units worldwide. After the US, China is Tesla’s largest market with sales topping 120,000 units in 2020, according to local registration data.
Tesla has been ramping up production in Shanghai. Analysts have forecast that China will account for a larger market share and earnings in the years ahead.
Tesla’s Lower Prices
Recently, Tesla announced lower-than-expected prices for its China-made Model Y SUV. Fitch Ratings, a credit rating agency, has said this will boost Chinese consumers’ overall demand for electric vehicles (EVs) in 2021.
However, analysts believe that Tesla’s reduced prices will not impact the sales of other EV companies in China due to a larger base but its expanding range makes it more appealing to the customers.
William Li, Nio’s CEO, and Xpeng’s He Xiaopeng have reiterated that Tesla’s latest price cuts have had little impact on their orders. But at the same time, analysts say that Nio will have to launch a premium flagship sedan to defend its market share against Tesla and further expand its range of models.
Despite higher prices, Chinese companies are confident about their market share. Nio boosted sales of its electric SUV in spite of having 40% higher rates than Tesla’s Model 3.