

It took the US eight years to reach 1M EVs on he road, China just did it in one.

That's right one year, one million EVs sold.

China's lead in the race to secure the future of the auto industry is nearly assured. Considering that five years ago China's EV industry was all but non-existent, this is an amazing turn of events. The speed in which the Chinese government pivoted to a clean energy economy has been remarkable. With it the future of the auto industry appears to reside in the East.

Meanwhile the US has watched the industry that it once dominated slowly slip away to other parts of the world. With little action politically to push electric vehicles (and clean energy in general) the US seems to be stuck in neutral and there doesn't appear to be a good way out.

Tesla's American Muscle Might Be Too Strong

To say Tesla is the industry leader is actually an understatement, Tesla is the industry. How Tesla goes so does the electric vehicle market. One slip up from Tesla and news headlines across the globe predict the demise of electric vehicles. When they succeed, every other manufacturer puts out a release stating their commitment to building long-range EVs. Through it all Tesla remains an American success and yet with all the good the big read giant has done, they've been unable to find a competitor that can match up.

Why is China's EV market so hot? Simply put, competition.

Elon Musk saw the need for competition long ago, knowing that for the industry to truly flourish a wave of competitors would be needed to drive knowledge and demand. He famously gave Tesla patents away for free just to spur on the competition. However, for all his trouble it was dieselgate that forced a real competitor into the market and it unfortunately seems that once again there is a lot of talk and little action.

In this vacuum Tesla has been allowed to dominate. They can build out their nationwide worldwide Supercharger network without interference from competition. They've nailed down the luxury segment of the market for years and looked poised to eat into the economy vehicles market share as well.

Elon and Co. have shown a remarkable ability to know which way the wind is blowing and its clear they see China as the driver of the new auto industry. While they have been building their most impressive projects stateside, that soon may change with the addition of the Gigafactory 3 in Shanghai. Elon knows the Chinese EV market is primed and ready, all he needs is a way to mass produce Model 3's there and he's about to get it.

Why is China's EV market so hot? Simply put, competition.

The Sleeping Dragon Woke Up

In 2013, China had nearly no EVs now they are on track to sell more than 2M this year. The country went from an EV-afterthought to driving the entire market in a little under five years and are now looking at lapping the field. So how did China get so far out in front?

Today, China has some 500 manufactures registered to produce EVs.

To understand this you need to go back to the beginning. Back in 2013 China's airborne pollution problem was the subject of headlines around the world. For a rapidly growing economy this was highly embarrassing. Something needed to be done and fast. It was the perfect time to implement strict anti-pollution measures especially from its growing single-commuter car market.

Copying California's ZEV mandate and EV blueprint, China started throwing heaps of incentives at perspective buyers and installing large numbers of charging stations. In no time the EV industry started to grow and multiple new companies started popping up. Today, China has some 500 manufactures registered to produce EVs. While only about 1/5 of those companies are actually producing vehicles today, its easy to see where the future of the industry currently resides.

In spite of all the inroads Tesla has made in China and the EV industry as a whole, there is one company that dominates the EV market in China, BYD.

Out Tesla-ing, Tesla

Build Your Dreams or BYD was founded in 2003, the exact same year as Tesla. While both companies took different paths, BYD has done a remarkable job of achieving a lot of things Tesla wants to and a lot of that boils down to the market they're in.

Much of Tesla's and BYD's long-term plans are the same. Both companies want an all-electric future, both have build an impressive set of different vehicles and both are entering into the energy market as well. The funny thing is, BYD has done a much better job of generating revenue than Tesla in large part thanks to the Chinese market. Not only are the vehicles cheaper to produce, but the EV market is far more mature, leading BYD to recently triple their profits.

Even as government subsidies start to dry up BYD is expanding rapidly into global markets, not just with their commuter vehicles but their rapidly expanding commercial bus line and willingness to play nice with offshore competitors like Daimler and Toyota. These new markets represent a growth opportunity to be sure but the real reason BYD is starting to rake in the cash is the simple fact that China has made clear they believe in an EV future.

If Tesla wants to continue to keep pace they have no choice but to push their way into the Chinese market. Further the US would do well to ensure that the new electric future isn't dictated by China and the only real way to do that is continued support for the expansion of the EV industry.