Analysis: Tesla's Model Y to emerge disruptor as China EV sales zoom in 2021

Model N

11/01/2021 23:00

* Tesla starts selling locally made Model Y in China this
month
    * Starting price about 10% less than similar
gasoline-powered cars
    * Model Y SUV pricing will be the one to beat -analysts
    * Chine NEV sales seen up 30-40% in 2021 -industry body,
analysts

    By Yilei Sun and Brenda Goh
    BEIJING/SHANGHAI, Jan 12 (Reuters) - New models will help
electric vehicle sales in China zoom this year, after tepid
business in a virus-riddled 2020, and analysts predict Tesla's
Model Y pricing will emerge as a major disruptor in the world's
biggest car market.
    Tesla Inc  TSLA.O , which became the world's most valuable
car maker last year, started selling locally made Model Y SUVs
in China this month, for almost a tenth less than
gasoline-powered luxury cars with similar market
positioning. urn:newsml:reuters.com:*:nL1N2JC038
    It set the starting price at 339,900 yuan ($52,376), or 10%
below official prices of Daimler's  DAIGn.DE  Mercedes GLC,
BMW's  BMWG.DE  X3 and Audi's Q5L - all locally made gasoline
sport utility vehicles (SUVs) with similar size and positioning.
    "The pricing will disrupt the conventional premium cars
market and shatter the traditional belief that the cost of an
electric vehicle (EV) should be higher," said Cui Dongshu,
secretary general at China Passenger Car Association (CPCA). 
    The Tesla Model Y pricing - that analysts say will be the
price to beat - and new models from others such as Mercedes and
BMW will help drive up demand in China, which also accounts for
almost half of global EV sales. 
    Sales in China of so-called new energy vehicles (NEVs),
which include battery electric, plug-in hybrid and hydrogen
fuel-cell cars, are expected to grow 30-40% to around 1.8
million units in 2021, according to its top auto industry body
China Association of Automobile Manufacturers and analysts.
    NEV sales likely rose only 8% last year to 1.3 million,
lagging a government target for annual sales to reach 2 million
by 2020, as the COVID-19 pandemic forced people indoors and
eroded demand in the first few months of the year. 
    China's decision to extend EV subsidies by two years,
instead of phasing them out by end 2020, will also underpin
demand in 2021. Beijing wants NEVs to account for 20% of its
overall auto sales by 2025, versus about 5% now. 
    Stricter rules in some cities to promote greener vehicles
and reduce air pollution are expected to force urban customers
to buy EVs too, according to Yale Zhang, head of the
Shanghai-based consultancy Automotive Foresight. 
    
    MORE MANUFACTURING
    Betting on growing demand, NEV makers such as homegrown Nio
Inc  NIO.N  and Xpeng Inc  XPEV.N  as well as foreign players,
such as Tesla, are expanding manufacturing capacity.
 urn:newsml:reuters.com:*:nL1N2IC0L5
    Tesla is expected to make "around or over half a million"
vehicles in China this year, with around 20% earmarked for
international exports, industry sources with knowledge of
Tesla's orders to suppliers said. 
    That represents a big increase from 2020, when Tesla
produced around 150,000 cars, analysts said. 
    Tesla did not immediately respond to a request for comment.
    Tesla's China website shows customers who place Model Y
orders now need to wait until the second quarter for delivery. 
    It is offering the same financing tools to customers for the
Model Y as it does for the Model 3 sedan that allow buyers to
pay only 10% of the cost upfront when they get the car.
    Tesla's Model 3, which it has been making in China for over
a year, is also seen chipping away at the dominance of Daimler,
Audi and BMW in the conventional premium auto sector.  
    Shanghai-made Model 3s outsold similarly positioned and more
expensive Audi's A4, BMW's 3-series and Mercedes C-class in
November, data from CPCA shows.
    "Competitive pricing is the key," CPCA's Cui said.
($1 = 6.4896 Chinese yuan)

 (Reporting by Yilei Sun in Beijing and Brenda Goh in Shanghai;
Editing by Himani Sarkar)
 ((Y.Sun@thomsonreuters.com; +86 10 66271262; Reuters Messaging:
y.sun.thomsonreuters.com@reuters.net))