Tesla cannot take the electric drive alone
Volvo’s move to go full distance with electric instantly scales up competition
the 257,000 battery-powered vehicles sold in that country. The reason is that the Chinese government taxes imported cars at 25 per cent. In the European Union, which includes Sweden, the tariff on car imports is 10 per cent. A US manufacturer faces an instant disadvantage, especially with a mass-market car, compared with a firm that makes vehicles in China and the EU. The import duties ruin the effect of electric car incentives.
Because suppliers capture a bigger share of the profit from electric vehicles than from traditional cars, large volumes are necessary for production to make economic sense for companies even when each individual car is sold at a profit (something that BMW says is true of its electric models, but Tesla can’t say of its pre-Model 3 range).
Automakers that produce electric cars in China and Europe are more likely to achieve large volumes than Tesla, with its US-based production. In January through April 2017, 126,000 plug-in vehicles (hybrid and battery-powered) were sold in China and Europe, compared with 41,000 in the US.
No wonder Tesla is talking to the Shanghai provincial government to set up a factory. It will, however, take it longer than Volvo, the German automakers — Volkswagen, BMW and Daimler — or General Motors, which are already building cars in China and investing in electric vehicle production there.
Besides, these companies, unlike Tesla, aren’t hung up on making battery-powered vehicles only. Volvo doesn’t intend to drop gasoline and diesel engines for all new models — it will merely supplement them with electric motors. That way, consumers for whom battery-powered vehicles aren’t practical because of shorter range and longer charging times can get more choice.
Now that the established manufacturers are playing in the electric vehicle space, their greater versatility, geographic reach and financial resources make the world a dangerous place for Tesla. Soon, it’ll be tested by the kind of competition to which “legacy” carmakers have long been accustomed, and it will be attacked from commanding positions.