Tesla Motors Inc (NASDAQ: TSLA) may soon have to push back Xiaomi electric vehicles

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Tesla Motors Inc (NASDAQ: TSLA) did not do as well as expected in China, and the firm’s shareholders suffered as a result in early 2015. Most attitudes towards the country, including that of CEO Elon Musk, appear to reflect a ignore and conquer point of view at the moment. This may not be possible any longer.

Many electric car companies are already doing better than Tesla in the Chinese auto market, but a filing on Thursday morning added Xiaomi to the list. The phone maker is one of the most successful Chinese start-ups in recent years and is starting to research electric cars. The South China Morning Post said Wednesday he had looked at the company’s car patents.

Xiaomi seeks to fight Tesla Motors

Tim Chen, who wrote the article for the Post, says the reason Xiaomi is entering the market might be based more on state support that the desire to earn money in the market. The state is expected to begin licensing electric vehicle manufacturing to companies outside the industry soon, and these companies will be able to obtain subsidies for the cars they sell.

“To qualify, applicants must demonstrate expertise in the design, testing and assembly of electric cars, as well as prove that they are in possession of the appropriate patents and have the appropriate intellectual property rights for the core technology, ”Chen writes.

If the company is just trying to prove that it did the research for enter the automotive market, it may not release a car at all, or it may not arrive for many years.

The patents Xiaomi filed this year are nothing to the huge stockpile of IPs Tesla Motors is sitting on. They cover things like cruise control, navigation, and handling rather than the details of the electric vehicle industry.

Xiaomi is looking for growth as the Chinese phone market slows down. Company CEO Lei Jun said last year that the company is on its way to “becoming the world’s largest telephone company.” In the first half of the year, Xiaomi only sold 34.7 million phones, leaving it unlikely to hit that number.

Global expansion has become a top priority for the Chinese phone maker. The firm has yet to launch its phones in the United States and Europe where margins could be higher, but the competition is even fiercer than at home in China.

Mr Jun defended his record on July 2, claiming “Even with the slowdown in the Chinese smartphone market, we have done a remarkable job posting 33% growth over last year’s numbers.” Elon Musk finds himself in a very different position.

The electric vehicle market is far from saturated, but it is not yet a product that the masses desire, and this became clear in Tesla Motors’ efforts in China last year.

Tesla Motors needs a Chinese partner

Tesla Motors has had real difficulty selling its cars in China for a multitude of reasons, but the price of the Model S in the country, boosted by a tariff and a lack of access to state support, is the cause. main.

Other issues that have been linked to Tesla poor performance in China include the lack of chargers in the country and a sales team that has not listened to Elon Musk’s ideas.

Stifel Nicolaus analyst James Albertine says Tesla doesn’t need to rely on China to secure 500,000 sales before the decade is out. The company can achieve this with sales focused on the developed world says Albertine and the stocks are a value of $ 400 accordingly.

Tesla has suffered more than one downgrade this week, and the company’s shares have lost nearly 9% of their value since trading began on Monday morning. The reason for the pullback is likely the result of a belief on Wall Street that Tesla Motors is about to be in trouble anytime soon.

Tesla Motors will release profit figures for the three months through June to the end of July, although no exact date for the company’s release has been proposed yet. Demand was not a problem for the company during the period. Model S sales reached 11,500 for the full quarter, a number released by Tesla Motors last week.

Tesla Motors could get around its pricing and state support issues by forming a joint venture with a Chinese company, but Elon Musk appears to be against the idea for the moment. Mr. Musk failed to break the control of the dealer network in many US states. It is likely to loosen the Chinese government’s grip on the country’s auto market.

Xiaomi, if it enters the automotive market, will not need to have so many patents to do so. The company will be able to take advantage of the patents that Tesla Motors has opened to any other company.

This means that even though Model S sales in China are low, there may be plenty of electric vehicles on the country’s roads that use technology from Tesla Motors.

Update 8:10 am EST: Added pars on stock pulling and publication of Tesla Motors results.

Update 11:58 EST: Added pars detailing Xiaomi’s expansion issues in China.

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