China is famous for taking the long view in both Economics and Politics. Zhou Enlai, the Premier under Mao Zedong, was once asked about the impact of the French Revolution, which occurred 200 years before his time. He famously replied, “it’s still too early to say.”
China has been a difficult place for Western business. When global companies who possess strong patents and powerful market share try to exercise their clout, the Chinese often erect impenetrable walls. Just ask Microsoft, Intel, Qualcomm, etc.
Now let’s talk cars. Tesla is one of the most valuable car companies in the world today. Its total market value, that is what it would cost to buy the entire company, is about equal to General Motors. GM produces 10 million cars per year, Tesla maybe 100,000. Tesla is a hot company.
But maybe we ought to be looking East not West when we talk electrics. The Chinese must realize it will take them decades to catch up to General Motors, BMW and Toyota in internal combustion engine automobiles. But as a “long game” player, China is quietly looking to win the next battle, which means alternatives. Tesla may have the sexiest electric product today but China has a growing list of electric car makers (see above) and government policy to encourage them. For instance the government has told Western manufacturers if they want to sell any cars in China in the future (40% of GM’s total global unit sales are in China today) then they have to make electric vehicles in the country by 2019. When you bring your best technology to China, one way or another that knowledge seeps into the marketplace and local companies benefit.
China now has a lottery system for license plates. In Beijing the lottery for gasoline cars is only 14,000 license plates per month but if you buy electric you get a license plate almost instantly at no cost. So China is pushing electrics and also favoring the local suppliers. The holy grail of electric cars today is the battery. He who comes up with lightest-weight, longest-life battery will win. And China is pushing to win. Shirley Meng who runs the laboratory for energy storage and conversion at the University of California, San Diego says, “In the development of new materials (batteries) the U.S. leads the way. But when technology leaves the lab and enters the market we have to start talking with the Chinese companies.”
It is very difficult for us tocompete when our companies are so focused on quarterly earnings while the Chinese companies are playing a much longer, win-in-the-end game.