Auto Industry

Musk mystified by China

State Grid opens Beijing to Shanghai charging network, but not to Tesla

CEO of Tesla Motors Musk waves during a news conference in Beijing

Gone flat? The electric carmaker’s share price has been damaged by sagging sales in China

Boosters of China’s electric vehicle industry got some welcome news last week. State Grid announced that it had installed 50 new charging stations, which now makes it possible to drive a battery-powered car between Beijing and Shanghai.

Well, to be accurate it makes it possible to drive ‘some’ electric cars between China’s two major cities. State Grid told Xinhua that the technology works with cars made by local firms BAIC and BYD, as well as with BYD’s joint venture with Daimler and Sino-Japanese firm Dongfeng-Nissan. State Grid’s fast chargers can top up a battery in around half an hour.

Conspicuous by its absence from State Grid’s announcement was any mention of the US firm Tesla, which uses a different battery charging technology.

In fact, the timing of the charging network’s launch (and Tesla’s exclusion from it) couldn’t have been much worse for Elon Musk, Tesla’s founder and boss. At the Detroit Motor Show last Tuesday, he conceded his firm was struggling in China with sales in the fourth quarter “unexpectedly weak”, blaming “misperception issues” over its charging facilities in the country. His admission of a weaker sales in China saw Tesla shares experience a single day drop of 7.7%, according to Bloomberg.

A Tesla spokesman in China told Tencent’s tech news portal that ‘range anxiety’ issues are being overstated, but are putting Chinese consumers off purchasing its battery-powered Model S sedan. But he added these concerns were at odds with the facts: it now has 800 charging stations in over 70 cities, with more being built in partnership with local firms such as China Unicom and China Merchants Bank. The spokesperson says the charging network has already expanded rapidly and the company will build a charging network nationwide.

As WiC has written before, when Tesla launched in China last year it enjoyed much hype and initially strong sales. However, that was quickly followed by local news items about disgruntled consumers who had problems recharging their cars. The State Grid also showed reluctance to work with the pioneering American firm on charging standards – preferring a domestic plan that better suited Chinese electric vehicle makers like BYD.

What Musk may now face in China is something akin to the personal computer wars of the nineties. His fast-charging technology may be the more elegant option – as Apple’s Mac operating system was – but it could be edged out by the sheer scale of the 19,000km network the state-owned utility is currently building in China. State Grid could be the Microsoft Windows to Tesla’s Apple OS.

However, not everyone thinks that Tesla’s sagging sales in China can be blamed entirely on standards wars and the mercantilist attitude Beijing is taking to the electric vehicle industry. Hedge fund manager Jim Chanos told CNBC that he reckons the high-profile cars have also been caught up in the fallout from President Xi Jinping’s corruption probes. “The real problem is an awful lot of people who can afford a Tesla right now in China have some bigger problems on their hands – that is, where did they get the money and who is looking over their shoulder. The anti-corruption drive. The high-end market for lots of things in China right now is very soft,” he told the channel.

And if Musk was already worried about rival carmakers enjoying an advantage in China – a country he last week described as “a wild card that seems to change for reasons we don’t understand” – he may also be pondering whether an ally might turn into a competitor too. Terry Gou’s Foxconn, a contract manufacturer most closely associated with making Apple’s iPhones, has been working with Tesla to make the 17-inch touch screens for its cars. But the 21CN Business Herald reported earlier this month that the Taiwanese tycoon has now become the second largest shareholder of Hong Kong-listed China Harmony Auto, having invested $78 million in the Chinese car dealership.

The newspaper thinks that Gou will use China Harmony’s sales outlets to distribute Foxconn-made electric cars. Last September it emerged Gou had already invested Rmb5 billion ($803 million) in the industry and the tycoon told a shareholders’ meeting his ultimate goal is to produce a battery-powered vehicle in the $15,000 price range. In that respect, Tesla is unlikely to be the competitor from which Gou hopes to take market share. Analysts instead think it is BYD which is most at risk from Foxconn – especially given this would dovetail with Gou’s desire to gain retribution after a messy intellectual property dispute with the Shenzhen-based carmaker.

In fact, intellectual property continues to be one way in which Tesla exerts an outsized influence on Chinese manufacturers. According to Xinhua, Tesla has been experimenting with graphene-based anodes in its batteries. These have been connected with a remark Musk made in December that “it will be possible to have a 500-mile range car, in fact we could do it quite soon”. Graphene technology can reportedly quadruple the density and output of lithium-ion batteries, says website Business Insider.

Indeed, the “Tesla effect”, comments 21CN, has led to graphene becoming “hot” again in China’s industrial planning circles. Last month President Xi visited the Jiangsu Research Institute of High-Tech Industries to study graphene development, the newspaper says, where he “asked about the details and expressed high hopes for the graphene industry”. Deals are following. Last week the CHINT Group (see WiC119) announced it had bought 80% of Shanghai Simbatt, a leading professional supplier of graphene powder.

The central government is also expected to approve a plan for a Changzhou industrial park to become China’s first graphene high-tech industrial base. A Rmb2 billlion fund has already been raised by the park and Ingenious Ene-Carbon New Materials to invest in projects.

Graphene’s potential is a topic the New Yorker also wrote a long and informative article on last month. It noted that there is a lot of research now going into its potential applications, with particular areas of interest including super-fast smartphone chargers and ultra-clean fuel cells.

Graphene was discovered at the University of Manchester in England just over a decade ago by Russian-born scientist Andre Geim. Since then the three biggest filers of graphene-related patents have been South Korea, China and the US. A Korean university working with Samsung holds the single largest number, with the New Yorker pointing out that two Chinese universities hold the second and third spots, while Rice University in America holds the fourth.

It interviewed the professor who runs the graphene lab at Rice, and he described how competitive the Chinese have become in the field.

“We don’t wait very long before we file,” Professor James Tour told the magazine, adding that he encourages his students to write up their patentable discoveries within 48 hours of a breakthrough – since speed is of the essence in this new field. “I was just told by a company that has licenced one of our technologies that we beat the Chinese by five days,” Tour revealed.


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