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  • Narrator: Although Tesla is based in California,

  • China seems to be where it's found its biggest supporters.

  • In 2019, the company saw its China sales increase

  • by 161% from the previous year.

  • That's 40,000 newly registered Teslas.

  • Despite the recent pandemic that saw Chinese car sales

  • decline by 42% for the first quarter of 2020,

  • Tesla bounced back immediately with record-setting months

  • in March and April.

  • But Tesla's successful run in China hasn't come

  • without plenty of help from tax exemptions on sales

  • to billions of dollars in funding for the construction

  • of its Shanghai factory.

  • China and Tesla have formed an uncommon

  • and symbiotic relationship, but why?

  • First, we have to go back to how Tesla got there.

  • Since 2015, China has been the world's

  • largest electric car market.

  • As Tesla saw its China sales triple to $1 billion for 2016,

  • then reach $2 billion for 2017,

  • it became clear the EV builder had an audience there.

  • However, as other automakers had already found,

  • the US trade war with China was a major obstacle

  • to selling cars there.

  • With heavy taxes being slapped on Teslas imported to China,

  • an $80,000 Model S from the US was selling

  • for around $140,000 in China.

  • The only way to sell cars to Chinese consumers

  • on a larger scale would be to build them there.

  • But the cost of producing cars in China was not cheap.

  • Government policy forced foreign automakers

  • to work with a joint venture partner in China

  • and share half the profits.

  • However, in 2018 the country began rolling back

  • these restrictions.

  • Elon Musk was quick to take advantage and that July,

  • signed an agreement to build a wholly owned factory

  • in Shanghai.

  • With $1.6 billion in funding from Chinese banks

  • and record-fast approvals by the government,

  • Musk constructed Tesla's third gigafactory.

  • By August 2019, the plant was already building vehicles.

  • The factory is currently making 3,000 cars a week

  • or around 150,000 a year.

  • By the end of 2021, when the factory is fully operational,

  • Musk plans for it to be churning out 500,000 cars annually.

  • And with China now exempting Model 3s from a 10% sales tax,

  • there's no telling how many the EV giant stands to sell.

  • So why has Tesla received such a warm welcome from China?

  • To start, there's the incredible amount of money

  • China stands to make off the factory alone.

  • The Shanghai facility was financed almost entirely

  • through state-controlled banks

  • who can expect a pretty big return on their investment,

  • plus, Tesla purchased a 50-year lease of the land,

  • which is money that goes directly to the government.

  • Additionally, 30% of the factory's parts

  • are purchased locally.

  • Musk says by the end of 2020,

  • he plans for that to reach 100%.

  • On a wider scale though, Tesla could be the boost

  • China's declining car market needs.

  • In 2019, total car sales in China fell by 8%,

  • after falling 3% in 2018.

  • More recently, factory closures due to COVID-19

  • had disastrous effects on this year's first quarter sales.

  • However, the industry is steadily recovering,

  • largely due to EV sales with Tesla accounting

  • for a whopping 30%.

  • With sales already improving in both March and April,

  • the automaker could play a major role

  • in reviving the country's auto sector.

  • Despite adding competition to China's enormous EV market,

  • Tesla could also have benefits

  • for the country's domestic brands.

  • Chinese companies like NIO and Xpeng

  • that were once dubbed "Tesla-killers" are now struggling.

  • While they are some of the most recognized

  • electric car brands in China,

  • they are virtually unheard of in the West.

  • A well-known international brand like Tesla

  • could help introduce the country's EV industry

  • to global market competition, giving them exposure

  • to buyers in America and Europe.

  • There's also the environmental aspect.

  • China, with a population of 1.4 billion

  • and some of the world's most heavily polluted cities,

  • is doing everything it can to prioritize EVs.

  • For Chinese consumers, electric cars are cheaper

  • to register and they're significantly more convenient.

  • As of 2016, at least a dozen major Chinese cities

  • have mandated even-odd policies.

  • Under these conditions, traditional vehicles

  • with license plates ending in an odd digit are allowed

  • on roads on odd dates and those with an even digit

  • on even dates.

  • EV drivers can take their cars out on any day.

  • Battery-powered vehicles make up 4.7

  • By 2025, China aims for EVs to account for 25100:05:13,170 --> 00:05:14,960 of all cars sold,

  • with Tesla potentially leading that charge.

  • Yet China welcoming Tesla with open arms is a risky move,

  • the country spent years and billions investing

  • in domestic EV manufacturers

  • and developing their own domestic market.

  • Now they've shifted focus, investing in a foreign company

  • on their soil.

  • In the end, Tesla could provide huge benefits for China

  • and open up the country's market on a global scale.

  • But, we could just as easily see a less happy ending

  • with Tesla running China's domestic companies

  • out of business.

  • Vice versa, Tesla could be overcome by the amount

  • of local competition.

  • Both Musk and China are taking a massive gamble

  • and only time will tell how this relationship ends up.

Narrator: Although Tesla is based in California,

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