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HSBC Report: Tesla cited as catalyst for future electric vehicle growth in Asia
Posted on July 11, 2016 by Matt Pressman
Tesla Motors' impact is being felt all across Asia. This past week, Japan's Panasonic said it expects strong demand from Tesla Motors [NASDAQ: TSLA] to help more than double its annual sales of electric vehicle (EV) batteries in three years. And it's not just lithium-ion batteries, EV charging infrastructure is growing too. Last week, Tesla opened its 100th Supercharger in China. And, Tesla is expanding its footprint across Asia -- it's prepping for its South Korean debut as it just registered plans to set up offices in Seoul. Furthermore, Tesla has spawned multiple billion-dollar backed electric vehicle start-ups throughout the region.
And according to CleanTechnica*, HSBC Global Research published its Asia Equity Strategy Report which notes that electric vehicles [EVs] could make up 35% of new car sales in Asia by 2040. And, the report cites Tesla as a key catalyst: "Tesla has shown that the barriers to entry in the car industry are far lower than widely assumed. It has taken the luxury car market by storm and in the process redesigned the economics of making electric cars. Earlier this year Tesla launched its Model 3, a cheaper car aimed at the upper end of the mass market. Electric vehicles are here to stay."
Above: Tesla expands into Taiwan starting with a store in Taipei (Source: Electrek)
HSBC's report puts the global electric vehicle market in the midst of its third global boom, which it says has been underway since the third quarter of 2015, driven by strong demand in China since Volkswagen’s emission scandal, the launch of the more affordable Tesla model, and a sharp reduction in the cost of lithium-ion batteries, which currently account for 30-40% of the price of an EV.
Above: Tesla owners set off on a road trip to explore East China (Youtube: Tesla)
“At the heart of this story lies a significant reduction in EV battery prices,” say the report’s authors, Herald van der Linde and Devendra Joshi – a reduction that is in turn being driven by a rapidly increasing scale of production. “If the percentage of electric vehicles on the road rises to 3.8% in 2020 from 0.4% in 2014, demand for lithium-ion batteries will rise 14x,” the report notes. “This benefits battery makers, as well as component makers that benefit from rising electronic content in cars.”
Above: Opening of Tesla's new store in Wan Chai (Instagram: @angiegiechu)
Policy support and stricter environmental regulations have also helped perpetuate this virtuous circle, the report says. China’s aggressive subsidisation program, for example, based on a target of 5 million electric cars on the road by 2020, is expected to have a positive knock-on effect for the entire EV and lithium-ion battery ecosystem. Korea has plans to introduce tax incentives for EVs, the report adds; while in India, the government last year launched FAME – Faster Adoption and Manufacturing of Hybrid and Electric cars – that offers subsidies of up to $US2,000 per green car.
Above: Hong Kong has the highest density of Tesla Superchargers worldwide (Source: South China Morning Post)
The Asia Equity Strategy Report, released by HSBC Global Research this week had detailed 10 key investment themes for the next decade, including its electric vehicle investment theme (dubbed Charge Me), that are expected to generate above-average growth “irrespective of the macro backdrop." With electric vehicle growth accelerating in the region, it's no wonder Tesla has been rumored to be opening a factory in Shanghai soon.