Tesla is doubling down on China Manfacturing

Opposite of what the market is doing, Elon Musk, true to his contrarian nature, is heading in the opposite direction and doubling down by heavily betting on China manufacturing.  His Shanghai Gigafactory 3 went online in record time last year and currently Tesla stock is said to be more valuable than the market capitalizations of all China’s listed carmakers combined.  Tesla is the sole owner of its Gigafactory 3 car plant in Shanghai and this is the first time that this has been allowed in China, previously requiring joint ventures with local partners. Combined with low cost land and government incentives including low-interest loans and subsidies, Tesla was able to drop prices and increase sales and manufacturing volumes.

Betting on China manufacturing

In a recent article in Week In China published by HSBC, the authors discuss the Tesla strategy betting on China manufacturing and its approach to sales and manufacturing. Tesla recently selected China’s Contemporary Amperex Technology (CATL) and South Korea’s LG Chem as new battery suppliers in an effort to diversify its sourcing chain beyond Panasonic and allowing it to retain all three of the leading EV battery makers in its supply chain.  They discuss a possible “cultural clash” emerging and Musk’s vision for upending 100 years of automotive tradition. And, as the EV companies battle over charging standards, a confrontation is likely to develop.  Further, the emergence of cobalt free batteries has the potential to lower the battery costs significantly.

All of this is intertwined with Tesla’s sales strategy in China and its Chinese competitors.  BYD, a Chinese battery-maker that morphed into a car firm (backed by Warren Buffett and South Korean giant Samsung), is one of China’s closer competitors to Tesla.  Similar to Tesla’s business model, BYD has branched out into solar panels and energy storage and an ambition to accelerate the world’s generation and storage of clean energy. Tesla is seen as a trendy pacesetter in China this year, despite the virus, accounting for nearly 1/3 of all electric vehicle sales in China in 2020 so far.

So, what about your company? Are you betting on China manufacturing? Could your Asia supply chain need a tune-up to compete in the “new world”?

Let our team of professionals show you how we can add value to your supply chain in these volatile times. Now, more than ever, you need someone on your team, looking out for your interests and controlling the hard to control offshore manufacturing situations.

Contact us today to get started on your “buy global – act local” supply chain strategy.

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