- Elon Musk hinted the Model 2, an allegedly cheap Tesla model, won’t be an entirely new concept.
- Chinese electric cars, even cheap ones, come packed with user experience technology at an affordable price point.
- If Chinese EVs make it to the U.S. market with their superior UX technology, Tesla will have a hard time competing.
During the Tesla Q1 2024 earnings call on April 23, Elon Musk said what investors wanted to hear — that the cheap Tesla was coming after all. Previous reports that it was being shelved spooked investors a lot.
But Musk gave few details aside from hinting the affordable Tesla Model 2 would not be an entirely new model. That left analysts guessing.
“I need to know the definition of ‘low cost’ and the definition of ‘new,’” Karl Brauer, executive analyst at iSeeCars told Electrify News in an interview.
Brauer, as well as other analysts, fear the Model 2 may just be a Model 3 with fewer features.
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Meanwhile, a few days later at the Beijing Auto Show, Chinese phone maker Xiaomi unveiled the SU7, a sexy electric car (especially if you think the Porsche Taycan is sexy because the SU7 has design similarities) that touted an impressive range of 430 miles for the entry-level model, all at a starting price of the equivalent of around $30,000.
Tesla Price Drop
That was less than the Model 3 sells for in China, even after Tesla sought market share in China by lowering its prices and initiating a bruising price war among Chinese EV makers.
Where Chinese electric cars really bring home the bacon is in “xìn jià bǐ,” which I translate as “value for money.” That is where I think they can beat Tesla hands-down, not just in China but in the U.S. The key is in user experience technology.
“Value is the most important factor in China because [EVs] pack so many features,” Tu Le, founder and managing director of Sino Auto Insights told Electrify News in an interview over WeChat as he was in a cab on his way to the Beijing Auto Show.
Images care of Lei Xing of China EVs & More
For Chinese consumers, that means more than just a nice-looking car with a decent interior. It means an out-of-this world user experience. It means an EV packed with the latest technology, from pretty much everything your mobile phone can do, to in-car karaoke and, in the SU7’s case, built-in mobile phone docks, a Go-Pro plug, and a fridge, among other amenities.
Tesla isn’t there yet. “The UX in Tesla vehicles isn’t super compelling, it is just very simple,” Le said. “If the Model 2 is a de-contented Model 3, it is likely to be dead on arrival in China.”
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The Future of Tesla
The Model 2 probably won’t be dead in the water in the U.S. The Tesla name at a lower price point would still attract buyers even if it was little more than a lesser version of the Model 3.
But what if a cheap Tesla in the U.S. had to compete head-on with cheaper Chinese EVs — affordable electric cars with not only a decent range but all that Chinese user experience technology?
A direct competition is currently hypothetical because no Chinese-brand passenger EVs are being sold in the U.S., and the issue has become very political. It’s likely that protectionism will rear its ugly head (even more) to prevent any direct entry into the U.S. market by Chinese electric cars. But there are other ways Chinese EVs can get here.
Chinese Electric Cars Don’t Necessarily Have a Chinese Automaker Badge
Chinese electric car company BYD is looking into building a plant in Mexico, though the automaker has said it won’t use that as a springboard to sell BYD electric cars in the U.S. Those would be cheaper than cars imported from China, however. Chinese electric cars manufactured in Mexico would currently dodge high tariffs because of the North American Free Trade Agreement.
But an electric vehicle doesn’t have to have a Chinese-brand badge to be a Chinese EV. Sweden’s Volvo is owned by China’s Geely, and Volvo will begin selling imported EX30s here in the U.S. this summer. But, Volvo apparently hasn’t opted for the kind of high-tech interiors Chinese EV makers offer to appease Chinese consumers.
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Other automakers have cooperation agreements with Chinese companies.
Nissan has signed an agreement with Chinese technology company Baidu to cooperate in developing intelligent automobiles. Baidu has a head start in generative AI.
Volkswagen and Chinese EV maker Xpeng are jointly developing “two smart e-cars.”
Stellantis, which includes Chrysler, Jeep, RAM, Fiat, Maserati, Alfa Romeo, Lancia, Abarth, Citroen, Opel, Vauxhall, and DS brands, last October created a joint venture with China’s Leapmotor, an electric vehicle manufacturer.
Nissan, Volkswagen and several Stellantis brands have manufacturing and dealer networks in the U.S. What if (when) they start producing affordable electric cars in the U.S. with Chinese user experience technology inside?
“If the Chinese are able to bring their technology to the U.S., it can challenge what Tesla has to offer,” Le said.
Also somewhat ominous for Tesla’s move to create a cheap car, the recently-released AlixPartners 2024 International Electric Vehicle Consumer-Sentiment Survey found that 58% of potential EV buyers in the U.S. were aware of different brands of Chinese electric vehicles. Among buyers between 18 and 25 years old, that awareness rises to 76%. That’s an age group that would be most attracted to the kind of tech-heavy user experience Chinese EVs offer.
That indicates a market for Chinese EVs already exists.
“When the Chinese show up in the U.S. with sub-$25,000 EVs, they are going to slaughter everyone who is selling EVs unless they have one of their own,” Brauer said.
Let me add: They have an affordable EV with the kind of gee-whiz technology those Chinese electric vehicles come loaded with. Tesla should take note.
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3 Responses
Well stated. Tesla is between a rock and hard place.
Within the Chinese market, as an example, Motorola was the most desired mobile phone, then it was Samsung.
Now they are nowhere to be found.
Same will be true of Tesla, in my opinion.
BYD and others will render Tesla as a memory.
Right, the fanbois get upset when you point out the EV market is just getting going for real. They act like Tesla has some magic power and will dominate and be 50% or much more of the market forever. This is fantasy. Just like Wood saying 80% of all vehicle sales in a cooler years will be EV. Tesla had out to themselves but no more. Not saying it can’t happen but stating it as certain is foolish. We will see how it goes.
But Tesla is for at least a few days the best choice for dumping depreciating dollars into a long term investment. Even Chinese cars have needs, and low prices show only the cost of Chinese labor. I urge citizen patriots of the USA to focus on the domestic auto makers.