Tesla May Form Chinese Joint Venture To Get Tax Subsidies

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Elon Musk does love kicking over the apple cart, but when it comes to the Chinese government, he may find it is better to play nicely than go it alone. Manufacturers who form joint ventures with Chinese companies enjoy significant advantages in the marketplace. SinceBMW entered into a joint venture with Shenyang-based Brilliance Auto Group years ago, its cars are not subject to the same import duties and tariffs that Tesla automobiles are.

FOr these and other reasons, Tesla may form a joint venture in China to make its cars more affordable to Chinese buyers. In addition to saving import duties, a joint venture would allow Tesla buyers to avoid paying sales tax on their cars, saving up to $13,000 per car according to InsideEVs.

Want China Times reports that “US electric car marker Tesla Motors may partner with auto manufacturers in Chongqing to build factories, after reportedly sizing up Chongqing-based auto manufacturer Lifan Group and Automobile Group on March 16, reports Shanghai National Business Daily. Lifan Group has been known for developing new energy vehicles over the past few years (In China, a battery powered or hybrid car is known as a “new energy” vehicle) and its self-designed chassis replacement technology was granted a national patent last April. Chang’an Automobile Group meanwhile announced its new energy vehicle strategies earlier this year.”

Chongqing would be an excellent place to manufacture electric automobiles. The city has been devoted to the development of new energy vehicles, reports Want China Times, and was the earliest city in China to develop a new energy vehicle. The city spent $43 million recently to subsidize 3,000 new energy cars in January and plans to build battery charging infrastructure including five integrated battery charging stations, 11 fast-charging stations, and 275 low-speed charging spots.

Philosophically, Elon Musk may be opposed to forming any joint ventures just as he is opposed to franchise dealerships. But Tesla operation in China has resulted in far fewer sales than anticipated, and in the end, Musk and Tesla Motors may have no other choice if they wish to be competitive in what is now the world’s biggest market for new cars.

 

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.