Tesla entry to boost innovation

Editor's note: Tesla, which manufactures electric cars in China, recently announced that it would lower the price of its Model 3 to 299,505 yuan ($43,092) to make it more attractive for the Chinese market. Along with the news that Tesla overtook BYD as the world's largest seller of electric cars in October 2019, this has caused concern among some Chinese. 21st Century Business Herald comments:

Some netizens say that allowing Tesla to make and sell electric cars at reduced prices in China will hurt domestic electric car brands.

Such concerns are normal as China's earlier industrial policy was to foster competition among domestic new-energy vehicles and batteries.

Over the years, China has developed new energy vehicles to become the world's largest producer and market for electric vehicles.

Having built a complete and independent industrial chain for electric cars, China can push its manufacturers to optimize technology and enhance competitiveness. The world's leading traditional automakers have all invested in electric car plants in China. Toyota has even offered to enter into a joint venture with BYD.

The introduction of Tesla will help boost China's supply chain. As more Chinese enterprises become part of Tesla's supply chain, they will not only improve their global position, but also provide better parts for domestic electric vehicles, thus enhancing the quality of home-made electric vehicles.

This will further consolidate the status of Chinese enterprises in the global supply chain and the country's status as the leading electric carmaker.

China is easing its industrial policy to allow competitors to play a bigger role in economic development. The electric vehicle is one sector where such policy transition can be applied. This is also a lesson China has learned from the failure of its long-standing industrial policy in the traditional auto sector.

China now needs to promote a competitive industrial policy and establish a unified national market that promotes fair competition while objecting to industrial protectionism. Tesla's entry into China is expected to help boost competition in the electric car market and promote innovation.