Could This Chinese Firm Derail Tesla Motors (TSLA) With Free EVs?

Tesla Inc (TSLA)

Tesla Motors Inc is the world leader in electric cars, but the number of firms interested in making big in the electric car market is rising. One such name is LeEco of China whose CEO Jia Yueting aims to take over Tesla with his electric cars.

Tesla Motors Inc (TSLA) Model 3

How Jia plans to take on Tesla?

Jia has a vision that all cars in the future will be all-electric, self-driving, have high-speed communications and probably cost nothing to use (yes you read it right). Jia – a billionaire entrepreneur – hopes to re-engineer the auto industry with its technology expertise and usurp Tesla – a U.S. pioneer in the making of premium EV.

Speaking in an interview, Jia said, “Tesla’s a great company and has taken the global car industry to the EV era. But we’re not just building a car. We consider the car a smart mobile device on four wheels, essentially no different to a cell-phone or tablet.” Sort of warning the US firm, he said, “We hope to surpass Tesla and lead the industry leapfrogging to a new age.”

Speaking to Reuters, LeEco co-founder and vice chairman Hank Liu, said that instead of copying Apple and Tesla their firm is defining the car in a whole new way. “Our products are not upgraded from those that already exist. They are revolutionary … products that never existed before.”

Jia plans to offer cars for free

Last week, Jia unveiled the LeSEE electric concept supercar to compete with Tesla Motors Inc ’s Model S. The Chinese firm will display this ‘smart, connected and self-driving’ car at Beijing autoshow this week. “People questioned our idea, a small IT company building a car to compete with the BMWs and Teslas of the world, and laughed at us. It wasn’t easy, but here we are,” Jia told Reuters.

In the next few years,’ LeEco hopes to start producing a version of the LeSEE at a plant near Las Vegas that its US strategic partner – Faraday Future – is building. Jia is an investor in the plant. Cars manufactured in this plant would be sold in the US and China. The firm also plans of producing electric cars in China as well, probably in partnership with BAIC Motor, says Reuters.

Talking about the pricing of the web-connected LeSEE electric cars, Jia said their pricing model will be disruptive, and be similar to the phones and TV sets that LeEco sells in China. Popularly known as ‘Netflix of China,’ LeEco will sell stuff like music, movies, TV shows and other content and services to drivers of its cars. It is probably for this reason that Jia said one day his cars will be free.

Funding – a key concern

The Chinese government allowed the tech firms with huge money to enter the auto industry so as to drive a switch to cleaner electric, to serve as an alternative to the gasoline cars. This initiative from the government helped in inspiring a wave of EV start-ups in China. But, how startups like LeEco will deliver on their grand visions is a matter of concern.

More than half a dozen of EV start-ups have received funding from Chinese tech titans that include Tencent, Baidu, Alibaba and Xiaomi. NextEV and CH-Auto are two such start-ups. It is widely expected that the bus, taxi and courier firms in China would be encouraged to go electric in the near-term.

Mechanically, it is relatively easier to produce electric cars, and thus, the entry barrier has been lowered. But, skeptics query how China’s start-ups will fund and make tens of thousands of EVs that have the potential to change the industry especially when Tesla Motors Inc is making waves with its recently introduced mass-market EV – the Model 3.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.


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