DAILY BASKET – NEWS COMMENTARY
Volvo Switches to Electric Cars
MARSAL COMMENTS: As off 2019, Volvo will phase out petrol engines and produce electric cars. All the other big manufacturers are already in different stages of producing electric cars (pure or hybrid). Tesla, the US electric car manufacturer, will face serious and increasing competition from the big boys armed with economies of scale, marketing muscle power and deep pockets.
The big manufacturers have another major advantage over Tesla. Most of them not only produce in markets with big demand (Europe and China), but also their sales are boosted by the incentive rebates granted by governments to electric car buyers.
Sweden grants up to US$ 4500 to each electric car buyer, China up to US$ 6300 and other European countries do something similar. As for the US, it grants tax credits between US$ 2500 and US$ 7500 , but only for the first 200,000 electric cars sold.
Another form of support to local manufacturers are the custom duties on car imports. China levies 25% and Europe approximately 10%. Add to that shipping costs and Tesla could face a difficult uphill road ahead (In April 2017, Tesla sold 7,548 electric cars in China, which is a tiny share of the total market sales of 257,000 cars)
No wonder Tesla is planning to set up production in China, and is already in discussions with the authorities there. After all, it must quickly act to support its share price, which values it greater than GM and Ford!
NEGATIVE FOR: Oil business, Traditional car manufacturers
POSITIVE FOR: The Environment and forward-thinking companies.
IMPACT POTENTIAL: Medium to High
TIME SCOPE: Medium and Long Term