Tesla China: Massive growth potential and challenges for Beijing's electric vehicle market [Video]

Posted on November 27, 2016 by Matt Pressman

Tesla Motors [NASDAQ: TSLA] is among many electric vehicle manufacturers looking to take part in China's massive growth opportunities. According to the International Energy Agency, this year: "China emerged as the main electric vehicle market: its booming electric car sales were larger in 2015 than in the United States." And a lot can be learned about China's potential (and challenges) for electric vehicles by analyzing its capital city, Beijing. To that end, China Dialogue* reports, "a growing number of the city’s drivers [are being] persuaded to try an electric vehicle (EV) by tight limits on new registrations for conventional cars, and generous financial subsidies. This policy mix is key to the public’s growing acceptance of EVs."

Above: Tesla in China (Instagram: Tesla)

An example of the incentives to buy an electric vehicle, is the lottery system as many in China are, "persuaded to buy an EV by the near impossible odds in the public lottery for license plates for petrol vehicles. At least 2.72 million people are registered in the lottery competing for just 90,000 licenses... By contrast, EV licenses are not awarded by lottery but through queuing." Furthermore, "Beijing’s 2016 quota for EVs was 40% of its total new car license plate quota. This is likely to increase, with further cuts due in the quota for traditional-fuel vehicles... [and] Beijing’s approach has shown that when purchase options are constrained, consumers care first about owning a vehicle and less about how it is powered."

 

Above: Annual license quota for all traditional, seen in blue, and electric vehicles, seen in red (Source: China Dialogue*)

However, based on the electric vehicle influx and: "as EV ownership increases so too does demand for electricity. Two solutions are being considered: more power sources and better management of existing ones... A team at Tsinghua University has proposed installing small-scale solar farms on city rooftops to power charging points, along expressways and at tourist spots surrounding Beijing, though trials have yet to take place. A similar model may be pursued by Tesla, which merged with rooftop solar power firm Solarcity in November; a step towards linking EVs with locally-produced solar power."

 

Above: Beijing plans to install 435,000 charging stations between 2016 and 2020 to cope with the rapid uptake of electric vehicles (Source: China Dialogue*)

Charging electric vehicles remains somewhat of a challenge due to lack of public infrastructure, but that's changing. "A major issue that risks damaging public acceptance of EVs and limiting adoption is a lack of charging points. Even in Beijing, which has 14% of China’s charging stations, recharging can be difficult... [but] to make Beijing more EV-friendly, the city plans to install 435,000 charging stations between 2016 and 2020." However, Tesla is already attacking the problem directly: "Higher-end EV brands, such as Tesla, offer free, unlimited fast recharges at the company's 11 Beijing stations."

 

Above: As evidenced above, a primary concern with electric vehicles appears to be charging (Source: China Dialogue*)

Furthermore, this month, Bloomberg reports that Tesla will: "introduce converters that allow owners to power their vehicles at state-run points. The adapters will give owners more choice and reduce range anxiety by expanding the number of recharging points in China beyond its own network of superchargers." Tom Zhu, Tesla’s China country manager explained, "The converters will help our sales by reducing preliminary concerns in China. It marks an important milestone in Tesla’s development in China."

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*Source: China Dialogue

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