Apple and Tesla Among Chinese Electric Car Winners
Electric cars are stepping on the gas in China.
According to the China Association of Automobile manufacturers, the country is the world's largest market for electric cars with estimated sales of between 220,000 and 250,000 this year. In contrast, the United States car market is expected to generate 180,000 in sales for electric car makers this year.
China's emergence as the world's largest electric car market is a delayed event. (For more, see: 5 Things to Know About the Chinese Economy.)
Back at the turn of the 21st century, expectations ran high for the Chinese car market. The government had set a goal of 500,000 electric cars in the country by 2011. But come 2011, there were only 600 electric cars on China's roads. The slow growth of China's electric car market occurred even as automotive sales skyrocketed in the country: last year, 23 million cars were sold in China making it the largest car market in the world.
But the ride for electric cars has become less bumpy in recent times due to a number of government incentives. For example, a 10% vehicle tax is no longer levied on electric vehicles. Similarly, it has become easier to import electric cars, thanks to reductions in customs and excise duties for that category.
Here are three companies expected to benefit from the boom in the electric car market.
It may be a well-known brand name in the United States but Tesla Motors Inc. (TSLA) has had a mixed ride in China. The company reported weak sales after its launch in the market last year and reportedly laid off 180 workers this year. The company's Chief Marketing Officer also resigned in February.
On the other hand, Tesla expects to sell 3,025 electric cars to Chinese consumers in 2015. In a recent address at Tsinghua University, Elon Musk announced that the company is planning to manufacture its cars in China within the next three years. That should bring down costs by a third and also make its cars, which are targeted at China's elite, affordable to average consumers.
Although it is not as well-known as Tesla, Kandi Technologies Group Inc. (KNDI) is a formidable competitor to the Fremont-based company. It may lack Tesla's formidable branding engine but the company hasn't done too badly for itself in the Chinese market, which is responsible for 98% of its sales.
Kandi reported revenues of $170 million in 2014, an 80% jump from previous year figures. More importantly, its net profits showed a stunning 175% increase to $14.20 million in 2014. Kandi launched a mid-tier luxury electric car in November to compete with Tesla. It has also diversified into the sharing economy through its "shared pure EV transportation platform." Considering that municipal governments have dampened the market for oil guzzling cars by cutting back on new vehicle registrations, the move should only help its bottom line.
The Cupertino-based Apple Inc. (AAPL) has, as usual, not commented on news reports about its electric car project, which is code-named "Project Titan." Given its recent spate of hiring experts and executives from the automotive industry, however, the project is almost a certainty. Apple may be the dark horse in the electric car market, given that its expertise lies in making consumer products that "delight."
On the other hand, the company already has a deep set of relationships with suppliers and distributors in China. In addition, it is among the few American companies that has successfully navigated the complexity of China's markets. In fact, Apple CEO Tim Cook has repeatedly said that China is crucial to Apple's bottom line. If the rumors are true, then Apple should benefit from its branding and presence in China.
The Bottom Line
After years of stasis, the electric car market in China is revving up. With an increasing set of government policies and incentives friendly to electric car makers, this should spell good news for electric car makers (and companies) already present in China.