Donald J. Trump, the president of USA tweeted that China had agreed to reduce and remove tariffs on cars, which indicates a huge challenge for local auto manufacturers in China. EV startups should accelerate the process of IPO, with help from the Science and Technology Innovation Board.
Dec 3, 2018 /EqualOcean/ - Donald J. Trump, the president of USA, claimed in his tweet that “China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.”, after coming to an agreement with XI Jinping to a truce in the trade war during a meeting at the Group of 20 summit in Argentina.
So far, China’s foreign ministry spokesman GENG Shuang declined to comment on any car tariff changes, according to Bloomberg, and there is not any related announcement released from the government to admit or deny Trump’s claim.
If Chinese tariffs on vehicles were to be reduced or even removed, the Chinese auto industry would definitely face huge challenges that have never existed before. And before this, probably without the consideration of tariffs, Tesla actually had already reduced the prices of Model S and Model X in China, with a reduction as much as 12-26%.
“Only two days after the reduction, the production line is fully occupied, consumers need to wait for one and a half month to get the customized vehicle. It’s been a while for such an exaggerated order.” A Tesla sales assistant in China said.
The much better competence of imported vehicles in China's market could be proved by above Tesla example, and would be strengthened further If the tariffs reduction applied.
It is hard to say whether the EV maker startups or the traditional auto manufacturers will face bigger challenges, the different development levels mean quite a lot of differences when talking about competing with imported vehicles. However, for those EV maker startups, bankrupts might come easier than the traditional giants, if facing similar hard conditions. Strong financial backup is needed.
NIO, as the first and the only listed EV maker startup, is relatively safer considering the financial issues.
XMotors, another EV maker which is about to start delivering its first model Xpeng G3 in December, had also to consider preparing its initial public offerings, according to the speech of Brian GU (GU Hongdi, 顾宏地), Vice-chairman and President of XMotors, on the Fortune Global Tech Forum at the end of November. While being different from NIO, XMotors conducts research on the Science and Technology Innovation Board. President Xi Jinping announced in his keynote speech at the opening of the first China International Import Expo in Shanghai in early November, and the new trading platform will experiment with a registration-based system for listed companies.
Brian GU believes the Science and Technology Innovation Board could give startups like XMotors the opportunity to go public, which could not have plenty of profits at the very beginning stages of the companies, and for which the traditional registration system of Chinese secondary market would not be suitable.
With the help of secondary market capital, a company will have better resources and capital advantages, and be able to better resist risks and meet challenges. Somehow the Science and Technology Innovation Board will do big favors for the innovative startups in China, especially in the huge challenges from the USA peers.
- Author: ZHANG Fan; Cover Photo by Carlo D'Agnolo on Unsplash. Write to ZHANG Fan at ZhangFan@EqualOcean.com