Tesla on Alert: Zeekr's Global Expansion Could Shift the Market
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Chapter 1: Zeekr's Challenge to Tesla
The recent announcement from Zeekr has put Tesla on notice. If you're unfamiliar with Zeekr, it's understandable; this company, a subsidiary of Volvo, has primarily focused on the Chinese market. However, that's about to change. Zeekr's latest statement reveals its intentions to expand globally, which could spell trouble for Tesla as it appears to have devised a strong competitive strategy.
Zeekr has long considered international markets but has stayed within China until now. A recent press release confirmed that the company will introduce its 001 electric vehicle (EV) in Europe in 2023, with plans to venture into the US, Canada, Australia, and the UK thereafter. This could be a significant cause for concern for Tesla.
To summarize the Zeekr 001, which I have previously discussed in detail (read more here), this high-performance EV offers a trunk space comparable to that of the Model Y, equipped with a 100 kWh battery pack that delivers 435 miles of range. It boasts a rapid charging capability of 360 kWh and accelerates from 0 to 60 mph in just 3.8 seconds. Remarkably, while similar vehicles in the West start at over $100,000, the 001 has been priced at approximately $48,000 in China since 2021.
Moreover, the 001 is set for enhancements. In 2023, Zeekr plans to upgrade its charging capability to 600 kWh, enabling an addition of over 180 miles of range in just five minutes. They will also roll out 600 kWh chargers in China to support this charging speed. Additionally, a variant using CATL’s Qilin battery, which offers a range of 622 miles, is expected to be priced between $55,000 and $65,000 (read more here).
In comparison, the Tesla Model Y Long Range has specs that are not as impressive as the non-Qilin 001. It features an 81 kWh battery (Tesla 4680 pack), a 330-mile range, a charging speed of 250 kWh, and a 0-60 mph time of 5 seconds, all for a price of $68,000. This discrepancy highlights the significant cost advantage Zeekr holds over Tesla.
The price gap is likely to widen. While Tesla ramps up production of its 4680 batteries and anticipates reduced costs, Zeekr is poised to introduce an even more economical battery. Their collaboration with CATL has led to the development of a sodium-ion battery, which will enter production next year. This new battery charges twice as quickly as Tesla’s 4680, lasts significantly longer, and is much cheaper to produce (read more here). If Zeekr adopts this technology, it could reduce its production costs by over $9,000 per vehicle.
Consequently, if Zeekr executes its strategy well, it could offer a sub-$30,000 electric vehicle with a range of 300 miles and ultra-fast charging capabilities—something Tesla would struggle to compete against. Even if Zeekr doesn't pursue this battery innovation, its entry into Western markets could dramatically impact Tesla's sales figures.
This isn’t mere speculation; it's already happening in China. While Tesla holds 70% of the EV market share in the US, its share drops to 20% in China, where competitors like BYD, NIO, XPeng, and Zeekr provide vehicles with superior specifications at lower prices. This intense competition has forced Tesla to reduce its prices in China to stimulate sales (read more here).
As Zeekr launches its competitive offerings globally, a similar impact on Tesla's market dominance seems inevitable.
Can Tesla Counteract This Threat?
Taking the Model Y Long Range as an example, Musk earns approximately $24,000 per sale (read more here). In theory, he could lower prices to compete with Zeekr. However, this would leave him with minimal profit margins, and the Zeekr vehicle remains a better option. Such a strategy could potentially lead to Tesla’s decline.
Tesla could also collaborate with other US manufacturers to advocate for significant tariffs on Chinese EV imports. This isn’t unprecedented; the US government has previously imposed tariffs on Japanese imports. However, given the current landscape of tighter emissions regulations and the challenges US manufacturers face in producing affordable EVs at scale, such an approach seems unlikely.
The most viable path for Musk to maintain competitiveness in the face of such formidable competition may be to adapt. Like Zeekr, Tesla has strong ties with CATL. If Musk were to shift away from the problematic 4680 battery and adopt alternatives like the CATL sodium-ion battery, they could sustain their market position. There's even a possibility that Musk is already pivoting in this direction, as it has been indicated that the BYD blade battery will be utilized in some models instead of the 4680 (read more here).
Regardless, Tesla's days of dominance in the EV sector are likely numbered. While Musk has options, it seems that to keep pace with these new entrants, Tesla may need to sacrifice its high profit margins and proprietary technologies. Ultimately, this impending competition will benefit consumers by driving technological advancements and reducing prices.