What about China?

I asked Gemini the following question:

“Tell me about the impact China will have on Tesla”

And Gemini’s response, which I think is fairly accurate:

China’s influence on Tesla is a two-sided coin: opportunity and challenge.

Opportunity:

• Market Growth: China is the world’s largest auto market, and the electric vehicle (EV) segment is experiencing explosive growth. Tesla benefits by having a large and potentially loyal customer base.
• Manufacturing Hub: Tesla’s Gigafactory in Shanghai is a major production center, allowing them to produce cars for the Chinese market efficiently and avoid import duties.
• Data & Innovation: Approval for full self-driving software in China could be a game-changer, providing Tesla with valuable data for autonomous driving development.

Challenge:

• Competition: Chinese domestic EV makers like BYD are rapidly innovating and offering feature-rich cars at competitive prices, putting pressure on Tesla’s market share.
• Supply Chain: China dominates the EV battery supply chain, so any disruptions there could impact Tesla’s production.
• Regulations: Navigating China’s regulatory landscape can be complex, and Tesla needs to maintain good relations with the government.

Recent developments show promise for Tesla. They secured data security clearance and are making progress on getting full self-driving approval for China-made cars. This could be a turning point to counter declining sales and regain a competitive edge.

However, competition is fierce, and Tesla will need to adapt and innovate to stay ahead in the ever-evolving Chinese EV market.

And some useful references from this inquiry:

• The effect of China’s EV dominance on the global automotive sector
• China’s BYD set to overtake Tesla as world’s most popular EV maker
• Tesla Shanghai becomes world’s largest production volume Gigafactory
• China – Country Commercial Guide
• More than 123 Chinese automakers are challenging Tesla for supremacy in the EV market
• Musk’s big win in China: Tesla clears data security, full self driving hurdles for locally-made cars
• Tesla Wins Data-Security Clearance in China

Ok Gemini, I have another question for you:

“What about China government incentives with respect to competition in the electric vehicle market segment?” My concern here is that Tesla might not be competing with Chinese EV companies on a level playing field. Here’s what Gemini says:

China’s government incentives have played a major role in fostering competition in the electric vehicle (EV) market, but their approach has shifted recently. Here’s a breakdown:

Previous Policy (Subsidies):

• Financial Support: From 2009 to 2022, China heavily subsidized EV companies through direct cash handouts and tax breaks. This helped reduce production costs and make EVs more affordable for consumers.
• Boosting Domestic Players: The policy also aimed to nurture domestic EV companies by offering them a financial edge, allowing them to compete with established automakers.
• Impact: This strategy was successful. China became the global leader in EV sales, with domestic players like BYD flourishing alongside Tesla.

Current Policy (“Dual Credit System”):

• Market-Oriented Approach: In 2023, China phased out direct subsidies and replaced them with a credit system. Automakers now earn credits for producing electric vehicles and lose credits for selling gas-powered cars.
• Encouraging Innovation: This system aims to promote competition by rewarding companies that develop more efficient and technologically advanced EVs.
• Leveling the Playing Field: The shift intends to create a fairer market where competition is driven by innovation, not just government handouts.

Overall Impact:

China’s government incentives have undeniably spurred competition in the EV market.

• Increased EV Production: The previous subsidy policy significantly boosted EV production in China, making them a much larger market share.
• Rise of Domestic Brands: Chinese companies like BYD were able to leverage the incentives to establish themselves as strong competitors to Tesla.
• Shifting Focus: The new credit system aims to push the industry towards further innovation and efficiency in EV technology.

This ongoing competition will likely benefit consumers by driving down prices and offering a wider range of feature-rich electric vehicles. However, it also puts pressure on Tesla to keep up with the rapid advancements of Chinese EV companies.

And some more useful references from this inquiry:

• China’s Electric Vehicle Market: A Storm of Competition Is Coming
• Electric vehicle sales leapt 55% in 2022 – here’s where that growth was strongest
• Following a boom, China’s electric vehicle industry now faces weak domestic demand and heightened geopolitical risk – The story of China’s EV industry.

In closing, here’s a good NPR article entitled “Chinese electric carmakers are taking on Europeans on their own turf — and succeeding“. In time, Chinese automakers will reach the US, probably via Mexico – China’s BYD plans new electric vehicle plant in Mexico. Elon Musk is concerned. He ‘predicted that Chinese automakers will “demolish” global rivals without trade barriers.’ The Alliance for American Manufacturing echoes this sentiment:

“The introduction of cheap Chinese autos – which are so inexpensive because they are backed with the power and funding of the Chinese government – to the American market could end up being an extinction-level event for the U.S. auto sector.”