It appears that the global EV market is not going to contract anytime soon, as the world’s largest auto market recently reiterated its stance on new energy vehicles.
As many countries around the world get on board with cleaner energy in a post-pandemic world, the demand for new energy vehicles – which include battery electric, plug-in hybrid and hydrogen fuel-cell vehicles – will likely go up as well. Recently, California has vowed to ban the sale of internal combustion engine vehicles by 2035, which will likely ripple across other states as well.
In the meantime, China, the largest consumer of vehicles, has projected that new energy vehicles will make up 20% of the country’s total auto sales come 2025 – something that is certainly going to serve as a tailwind for EV manufacturers such as Tesla.
According to an estimate by China’s State Council released earlier this week, the next five years will see the demand for new energy vehicles such as electric cars soar as the government looks to transition the country towards green modes of transportation. The Chinese government plans to implement quotas and incentives to transition auto makers into EV technology, while the State Council has called on more efficient charging stations and battery swapping network improvements.
Although China’s latest projections are falling slightly short of its 25% goal set out by the country’s Ministry of Industry and Information Technology in 2019, it will still serve as a significant expansion into the world’s biggest vehicle market. However, it also appears that some Chinese EV startups such as Nio, Xpeng Motors, and WM Motor are not doing as well as they had hoped despite the projected increase in demand, and as a result they had to be backed and bailed out by the Chinese government during the pandemic.
The increased competition among vehicle startups in China’s EV market could turn into an opportunity for American EV automakers, such as Tesla. Despite Tesla’s growing worldwide popularity however, the California-based EV manufacturer has recently irked the wrong nerve with the Chinese government. According to Xinhua, the state-owned news agency, Tesla has allegedly been “unreasonable and arrogant” regarding its recent recall of nearly 50,000 Model S and Model X vehicles exported to China.
According to an article published in Xinhua in Tuesday, Tesla has allegedly repeatedly refused to acknowledge the vehicle defects outside of China, and instead has been insisting the suspension error is the result of user behaviour and pressure from regulatory bodies. The NHTSA has yet to act on the Chinese recall, but if it does, then a similar recall could be ignited in the US, impacting over 200,000 Tesla vehicles. Nonetheless, with China’s projection of a 20% expansion of new energy vehicle sales, and a Chinese EV market that is becoming increasingly saturated, it may be time for Tesla to start playing nice if it wants to maintain its whooping $400 billion market cap.
Information for this briefing was found via Reuters and Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.