It will come as no surprise to learn that the US electric vehicle market continues to grab the headlines and rightly so. The likes of Tesla have taken this market from near obscurity just a decade ago to within touching distance of the mass market. However, while all eyes are on the US electric vehicle market, is China really the market to watch?
Chinese investment in EVs
If you follow the financial press you will see billions upon billions of dollars invested by the US government directly and indirectly into the electric vehicle market. This tends to be by way of loans or tax breaks thereby allowing the government to take a step back leaving the “experts” to get on with the business of pushing the market. However, the business model adopted by the Chinese government is very different but could potentially see China overtake the US.
Direct investment in electric vehicles
You will see an array of Chinese electric vehicle companies hitting the headlines in their own right. We have seen everything from Tesla lookalikes to electric buses, new battery technology and groundbreaking sales across China. This all looks very commercial on the surface but if you dig a little deeper the business model is very different to that of the US.
While the Chinese government does not necessarily wax lyrical in the press about its direct investments in corporate entities, it is well-known that a variety of electric vehicle manufacturers have been in receipt of direct investment. This cuts out the middleman, reduces transaction costs and also, perhaps more importantly, ensures that the Chinese government is onside in the future. While the US authorities seem caught between the oil industry and the electric car market the Chinese government has no such qualms.
Pushing electric vehicles
If you compare the way in which the Chinese authorities push electric vehicles to the way in which the US government does, you will see a major difference. Even though the Chinese authorities have missed their initial targets for electric vehicle take-up they seem determined to push through this revolutionary change in travel. Pushing the adoption of electric vehicles via government channels is a lot more powerful in China than it is anywhere else in the world. The authorities may well have taken on some of the characteristics of corporate USA but under the surface the government still dictates the way.
In the case of new technologies, potentially ground breaking technologies, who is to say that the Chinese business model is not the right choice? The US authorities continue to plough billions upon billions of dollars into the industry while adopting a policy of “do as we say, not as we do”. So, should we really be dismissing and criticising the Chinese business model?
The likes of Tesla have spent an enormous amount of time over the last few years trying to build a relationship with the Chinese authorities. If Tesla is such a large name in the industry, as it so obviously is, why is it so keen to enter the Chinese market via official channels? Surely the power and the name of the company should be enough to ensure significant take-up across China?
The fact is that corporate entities entering the Chinese market perform far better when going via official channels and in partnership with the Chinese government. You may see joint ventures and partnerships with unknown Chinese companies but behind the scenes the Chinese authorities are working hard. It will be interesting to see whether all of this hard work pays off and the Chinese authorities finally crack the electric vehicle mass market before their US counterparts.
Who is your money on?