Tesla announced on Monday it would begin to export its Model 3 cars from China to more than 10 countries in Europe this October, marking a major export from China since the US automaker opened its Shanghai factory last December.
China is gradually becoming a major hub for carmakers, and many of them are planning to sell their made-in China cars beyond Chinese market.
German carmaker BMW is also preparing to export its electric iX3 model, produced at a joint venture plant in Shenyang, China, to Europe, while Daimler is shifting production of its Smart branded city cars to Hangzhou Bay, according to Reuters.
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Statement from Tesla said the 10 European countries include Germany, France, Italy and Switzerland.
The Chinese government reviewed its automobile manufacturing policies in 2018, to allow foreign companies to build cars and export to other countries from China, and has gradually improved the policies to be more tolerant since then.
“Support from Chinese government towards the industry, innovative local companies and customers embracing new technologies make China the best market for smart electric vehicles,” Tesla said, adding that it would expand car production, charging and sales networks in China.
In 1994, China issued a policy for its Automotive Industry. The 1994 Auto Policy introduced restrictions on foreign automakers owning more than 50 percent in any Sino foreign joint venture and also limits the foreign automakers to no more than 2 joint ventures for any single type of vehicle in China. There was the 50% + 2 rule, which limited the existence of many foreign automakers.
For years, the 50% + 2 rules were considered a necessary policy to buy local automakers time to gain skills, master the technology, and build the brands that will allow them to compete; before international automakers would be given access to the Chinese market.
Chinese policies on auto-maker and foreign investment were gradually eased as the country attained its goals for the automotive industry.
For instance, in 1995, China introduced the “Foreign Investment Catalogue” which detailed the shareholding limitation on foreign automakers. Since then, the Foreign Investment Catalogue has been amended eight times to reflect China’s evolving views on foreign investment’s role in industrial policy.
Generally, the Chinese policy was considered successful. China gradually became the world largest automaker, a position it has held since 2009. Having achieved its objective to this degree, China has been relaxing its policy on the automotive industry.
In 2018, Chinese authorities jointly issued the Special Administrative Measures for Admittance of Foreign Investment (2018 Negative List). The 2018 Negative List confirmed the pledge to fully remove foreign investment ownership limits on the auto industry over a 5-year transition period.
The relaxation of this rule has enabled foreign companies such as Elon Musk’s Tesla, to establish vehicle manufacturing plants in China, especially for EVs (electric vehicles). And there have been more beneficiaries of the short term policy relaxation window.
Apart from the policy reforms, China introduced subsidies and tax waivers for car manufacturers, which reduced the cost of production and encouraged buyers to embrace the more environmental friendly electric vehicles.
Tesla has won a major automobile market share in China, selling more than 11,000 Model 3 cars last month. It is also expanding its production capacity in the South Asian country with a new factory in Shanghai, where it plans to build its Model Y sport-utility vehicles.
Outside China, the world’s most valuable automaker is also planning to build a factory in Berlin Germany. The German government begins to toe the path of China by introducing subsidies up to 9,000 euros for buyers of electric cars, including Tesla’s Model 3, according to Reuters.
Tesla has a production target of 150,000 vehicles this year from its Shanghai factory. More Western automakers, including those from the US, are preparing to establish in China, even as the tension between Washington and Beijing is escalating.