Stiff challenge awaits Tesla in China in 2021

SHANGHAI: Tesla Inc. is coming to the end of its first year selling China-made cars with a commanding position in the world’s biggest electric-vehicle market, but Elon Musk shouldn’t rest on his laurels.

While Tesla regularly topped monthly premium EV sales tallies this year, helped by the sedans churned out from its multibillion-dollar plant opened to much fanfare in Shanghai last December, 2020 was also marked by rivals catching up. In 2021, the breadth of the competitive attack that Tesla faces will be greater than ever.

Whether Tesla can defend its lead in China will be key to its wider growth and earnings trajectory. While still in its infancy, China’s electric-car market dwarfs that of other countries and the government is intent on further expansion amid commitments to reduce fossil-fuel use. Tesla’s fate in China will also show whether it can grow into a truly global carmaker, an ambition investors are banking on after pushing the company’s shares up almost 700% this year.

A trio of local champions Nio Inc., Xpeng Inc. and Li Auto Inc. has emerged as the front line against the Palo Alto, Californiabased company. All traded in the US, and enjoying backing from government entities or internet giants, the three startups are quickly winning fans, with sales of their electric SUVs, sedans and crossovers also rising in 2020 and their shares surging on Tesla’s coattails. “Since June, you’ve seen a steady rise in sales by Nio, Xpeng, and Li,” said Bill Russo, founder and chief executive officer of advisory firm Automobility Ltd in Shanghai. “Can you stay competitive with these fast-moving, internetbacked, very deep-pocketed companies?” China is Tesla’s largest market after the US, with sales in Asia’s biggest economy topping 120,000 units this year, shows local registration data. The Model 3 sedans Tesla sells in China have higher profit margins than its vehicles in the US and Europe.