Leading global electric vehicle (EV) maker Tesla Inc. received permission in mid-November to begin mass production at its Shanghai Gigafactory, allowing Tesla to sell locally-built EVs directly to its Chinese customers, the largest group of EV consumers in the world. Tesla’s fast entry to the Chinese market is strategic because of the huge opportunity that the Chinese market represents.
China’s EV market: A vast “blue ocean”
According to a report by the Chinese Auto Association, China’s 2019 EV sales reached more than 1.04 million by November, still remaining as the biggest EV market in the world. During this same period, the Chinese government implemented a series of policies designed to promote sustainable and high-tech development of the EV industry.
On December 3, China’s Ministry of Industry and Information Technology (MIIT) released an EV industry development plan for 2021-2035. The plan announced that the EV share of newly sold cars would rise to 25% by 2025. This ambitious growth goal indicates the Chinese government’s determination to develop a robust, homegrown EV industry.
Along with the central government, local government action has also been crucial to the development of China’s EV industry. Last December, the Beijing municipal government implemented a plan to accelerate the replacement of gasoline-powered taxis with electrically-powered ones, with the goal of reaching 400,000 total EV taxis by the year 2020. Other provinces and cities, such as Guangdong and Yunnan provinces in the south and Taiyuan city in the north, introduced similar policies to upgrade online ride-hailing vehicles and taxis to EVs this year. Shenzhen, as one of the cities leading on the introduction of EVs, has already achieved a completely-electrified public transportation system, and is on track to convert all of its taxis EVs by 2020.
Tesla’s approach
Tesla has its eyes not only on the Chinese market, but also on the well-developed EV industrial chain. It reportedly took Tesla’s Shanghai Gigafactory 168 working days, or roughly 6 months, to go from the first step of obtaining permits to starting production. The public saw this rapid expansion as a prime example of Silicon Valley’s innovation combined with China’s manufacturing capabilities and speed. Elon Musk even predicted that Shanghai Gigafactory was prepared to produce roughly 1000 EVs per week by the end of this year. To foster faster R&D and innovation, Tesla China built the first domestic technology innovation center in Beijing, which reportedly focuses on R&D for EVs as well as spare parts, batteries, energy storage equipment and information technology.
Before completing the Shanghai Gigafactory, Tesla had already began operating two U.S.-based Giga factories, one in Reno, Nevada and the other in Buffalo, New York. The Reno plant ,Tesla Gigafactory 1, is the largest battery factory in the world with an output of 20 GWh per year and rising. The Buffalo plant,Tesla Gigafactory 2, mainly produces solar cells using Panasonic technology. Elon Musk recently said that a new factory will be built in the Berlin area in Germany.
Along with the integration of its global supply chain, Tesla is also continuing to ensure its competitiveness by investing in R&D and innovation. On Tesla’s Autonomy Day in April, it introduced its fully-autonomous self-driving computer, a smart system that makes driving decisions and adjustments based on what it “sees.” As with production at Tesla’s Shanghai Gigafactory, it only took Tesla 18 months to go from the design to mass production stage. This system is also notable in that it is one of the first not to use the Lidar autonomous system; always true to character, Elon Musk even mocked industry players who still rely on this outdated system. The company is betting that a genuine breakthrough in self-driving technology breakthrough will occur in the near future.
WM Motor’s approach
Similar to how Apple assembling its iPhones in China has driven the rise of Chinese smartphone brands such as Huawei, Oppo, Vivo, and Xiaomi, Tesla’s presence in China is driving the improvement and development of China’s smart EV industry. Among China’s top -tier EV makers, EV startup WM Motor (Chinese:威马汽车) stands out.
Headquartered in Shanghai, WM Motor shares a similar vision with Tesla as to how to adopt the techniques of smart manufacturing for the production of EVs. In 2017, the company built a facility in Wenzhou that was the first Industry 4.0 smart EV factory in the field. This facility is designed to serve as an intelligent industry park which integrates and performs four total functions – smart manufacturing, smart logistics, parts production, and autonomous test driving.
WM Motor believes in building pure electric vehicles. WM Motor’s primary customers are middle-class 21- to 49-year-old Chinese who want to purchase trendy, high-tech vehicles at reasonable prices. To meet its customers’ demands, the company’s innovation model embraces cutting-edge technology including 5G, AI and big data, autonomous driving, and constantly seeks to reinvigorate its business model by updating its product line with new models and services. By November 2019, WM Motor had filed or received approval for 1,242 patents, hundreds of which were in the field of AI.
WM Motor has laid out a global blueprint for R&D. It built an R&D center for product planning and design in the southern Chinese city of Chengdu, and operates an R&D center based in Saarland, Germany, focused on developing pure EV technologies. The two innovation centers collaborate with its Shanghai center on EV design and procurement.
Furthermore, WM Motor invested heavily in developing core technologies, such as autonomous driving and smart cockpit technology similar to Tesla, to meet its users growing high-tech demands. WM Motor’s Level 2 automated technology reached the mass-production stage in 2019, and it will launch the Level 3 automated technology in 2020. The next generation chip platform, Living Engine 3.0 system, and 5G-compatible smart-cockpit technology will all be introduced to the market next year.
WM Motor’s first model, the EX5, established a high reputation in the EV industry over a short period of time. This November, WM Motor launched its second model, the EX6 Plus, at the Guangzhou Auto Show. EX6 Plus reflects the company’s strategic layout and applications in intelligent driving, smart cockpit, and V2X, which were added to meet users’ demands for innovative features. Priced at RMB 239,900 (USD34,116), the EX6 Plus is equipped with its core technology, the Living Engine 2.0, which uses a voice assistant to help drivers connect with an integrated Internet of Things (IoT) platform. This platform is compatible with a number of popular consumer products, such as Xiaomi’s air purifiers, and is also designed to provide better user experiences while driving during rush hour or with children, for example.
After the initial release of the EX5, it only took WM Motor one year to develop and release the EX6 Plus, highlighting how the company has reached the highest levels of efficiency and product capability. From January to November 2019, WM Motor sold a total of 15,355 EX5 EVs. By selling 2,056 EX5 models in October, the EX5 was elevated into the ranks of China’s top-10 most-sold EVs. Sales results for the EX6 Plus have yet to be released.
The appetite for EVs in the Chinese market is still growing. Due to strong policy support for clean transport and increasing consumer demands, EVs may take 50% of the auto market share in China by 2025. Will Tesla China and WM Motor seize the opportunity and reshape the EV industry?
(Top photo from WM Motor; The company factory in Wenzhou)