Elon Musk has tough tariff riddle to solve

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The importance of China to Tesla and all electric-vehicle makers comes after new measures from the Chinese government to spur the development of EVs. China is implementing new incentives for EV adoption to replace expiring subsidies and push automakers onto more aggressive EV investment and production schedules.

“This will be the strictest and biggest EV plan worldwide, integrating European and California’s EV policy together, and will give strong momentum for China’s EV development,” Jiayin Song, a Beijing-based senior associate at U.S.-based Rocky Mountain Institute, which helped China devise its long-term climate change strategy, told CNBC last October. It will be the new driver for EV development after the Chinese government gradually shrinks the size of fiscal subsidies for new-energy vehicles.

The new rules regulate both automakers’ company-wide average fuel mileage and the percentage of electric and plug-in hybrid vehicles in their new car sales, Song said. It requires automakers, both domestic and global, to obtain 10 percent of credits from new-energy vehicles beginning in 2019. The rule applies to car makers that manufacture or import more than 30,000 traditional vehicles annually. Those who fail to comply must buy credits or face fines, she said.

In fact, China’s support for EVs has been so swift that implementation of the new regulations was pushed back a year to 2019 to give automakers more time; the Chinese government was originally pressing for implementation next year. The U.S. government meanwhile this week announced its intention to drop Obama era fuel-efficiency measures. Chinese government-subsidized local electric-car makers also are rapidly advancing. The major global auto companies — including Ford and GM — will also push further into the Chinese market and EVs as the government clarifies its support for these efforts.

Even if Tesla is banking on more sales from China, competition between Musk’s electric-car company and local Chinese EV makers is poised to accelerate. One team of Wall Street analysts thinks Tesla’s Chinese lead is secure. Piper Jaffray wrote late last year that with Tesla’s brand already established in China — especially at the highest price points — and with China pushing to have all cars powered by electricity at some point in the future, the American brand’s position is relatively secure. Indeed, Piper thinks it will remain the market leader in China indefinitely.

Goldman analysts led by Tokyo-based Kota Yuzawa recently published an estimate that 8 percent of global auto sales, which today would represent almost 8 million cars and light trucks, will be all-electric by 2030.

China is already the world’s largest car market and biggest part of any forecast. But that puts Goldman at the bearish end of Wall Street projections: Morgan Stanley, a longtime Tesla bull, projects the same EV growth to reach 27 percent.



Source : CNBC