Question 7(a)
Sources for use with Section B
The electric vehicle market in China
Figure 1 Market share for electric vehicle passenger sales, based on
sales revenue, 2021
SAIC
Others
25%
29%
Li Auto
3%
BYD
NIO 16%
4%
GWM
5%
GAC
Tesla
6%
12%
Figure 2 Tesla electric vehicle prices, 2022 (Yuan, 000s)
Model of vehicle January 2022 October 2022
Model 3 Rear Wheel Drive 280 266
Model 3 Performance 368 350
Model Y Rear Wheel Drive 317 289
Model Y Performance 418 398
Extract A Changes in the Chinese electric vehicle market
In 2020 the Chinese Government adopted many new measures to reduce CO emissions,
2
in order to meet its climate change goals by 2030. For example, the Government has
increased the number of charging points and raised the tax on non-electric vehicles.
The global increase in the price of fuel has also led to an increase in demand for electric 5
vehicles. Between 2021 and 2022 the sales of electric vehicles in China increased by 83%
to 5.92 million.
Extract B Tesla in China
Tesla, a US-owned vehicle company, has attempted to increase its sales in China to take
advantage of the increasing demand for electric vehicles. In 2019 the company opened
a factory in Shanghai. It became the first fully foreign-owned vehicle manufacturer in the
country. By producing vehicles in China, Tesla was able to take advantage of government 5
incentives, such as subsidies, aimed at promoting the domestic electric vehicle industry,
as well as benefiting from low-cost labour. This new factory was expected to increase
Tesla’s competitiveness in the Chinese market by making its vehicles more affordable
for consumers. China has become a key manufacturing centre for Tesla. Its factory
in Shanghai produced over 710 000 vehicles in 2022. This represented 52% of the 10
company’s worldwide output.
However, production has been difficult in China. Tesla faced supply chain disruptions
as a result of the global health crisis of 2020 to 2022. This resulted in a reduction in
output and an increase in its costs of production. Tesla also had to pay taxes on imported
components and finished vehicles. 15
In October 2022 Tesla reduced the price of several of its electric vehicles. The two main
reasons for these price reductions were:
• a fall in its production costs arising from government subsidies to electric car
manufacturers
• improved efficiency from manufacturing in Shanghai. 20
The lower prices of Tesla’s electric vehicles had a significant impact on its competitors.
Domestic and other international manufacturers responded by reducing their prices for
electric vehicles as they competed for market share.
With reference to Figure 2, calculate the percentage change in the price of the Model 3 Rear Wheel Drive vehicle between January and October 2022.