scorecardTesla may be about to get a big win in China
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Tesla may be about to get a big win in China

Tesla may be about to get a big win in China
Tech2 min read

Elon Musk

AP Photo/Jack Plunkett

Tesla CEO Elon Musk.

The Chinese auto market is already larger than the US and projected by some optimistic analysts to more than double annual North American sales in the future.

The US market tops out at about 17 million. China could go to 40 million in new vehicle sales per year.

Car companies see this as a booming opportunity. Automakers such as General Motors and Volkswagen have been selling in China for decades and are looking foward to big gains.

But China could be contemplating a major shift in how its auto industry operates. Since the mid-1990s, foreign automakers have been compelled to establish joint ventures with Chinese companies, if they want to manufacture vehicles in the Middle Kingdom (car companies like to build close to where they sell).

That could be about to change, particularly where electric vehicles are concerned, as Bloomberg reported:

A relaxation of the joint venture rule would give companies like Tesla Inc. the opportunity to set up fully owned manufacturing operations in China, the world's biggest market for electric vehicles. Ford Motor Co. is exploring setting up a joint venture to produce electric vehicles in China with Anhui Zotye Automobile Co. while Volkswagen AG has partnered with Anhui Jianghuai Automobile Group Corp. to make electric cars.

China's government has lately been making noise about a total phase-out of gas-powered cars, and it's no secret that Tesla CEO Elon Musk wants to start assembling vehicles in China rather than having to export them from the US.

From China's point of view, easing the JV rules could spur considerable production of electric vehicles and related infrastructure, as powerhouse western carmakers position themselves to grab new market share.

For Tesla, not having to go through the JV process could rapidly accelerate its move into China. But Tesla's much larger and more China-experienced competitors might not like it. A carve-out for Tesla, even if they also benefit, could lead to charges that Musk and his company gained preferential treatment by avoiding the JV policy.

In the end, protests might not matter much, as there could be plenty of sales to go around.

Get the latest Tesla stock price here.