China Will Help Tesla Go to Foxconn Scale to Stop Air Pollution and Save the Planet

No one questions the ability for giant factories, cities, infrastructure and supply chains to be built in China. No one questions that Elon Musk is perhaps the greatest living industrial and technological innovator and he is in the running for greatest to have ever lived.

This article will make the case that a deep partnership between Elon Musk and China over batteries and electric vehicles could massively improve the air pollution situation, save millions of lives per year, reduce air pollution and global warming.

I have written another article that tries to simplify the answer of why China and Tesla can help fix each others most important problems.

The construction of the Shanghai Gigafactory to build electric cars has started in China and could be completed in 6-12 months instead of 2 years or more.

If this construction is completed and then smoothly ramped up to full production in record time, then this could be the start of a beautiful friendship and powerful partnership.

The Shanghai Tesla factory is the first time the Chinese government has allowed a foreign company to build and operate wholly owned facility there. Foreign companies have previously been required to form a 50-50 joint venture with a local partner to build a factory in China. Chinese President Xi Jinping has pushed forward plans to phase out by 2022 joint-venture rules for foreign automakers. Tesla is one of the first beneficiaries of this rule change.

I believe there are more reasons why Tesla was the first to get this special treatment.

China Could Support Tesla to Foxconn Scale or More

After the first Gigafactory, China could partner or provide support for Tesla and enable mass produce of Gigafactories and a build another dozen each year. Staffing would not be an issue. Tesla plans to have 20,000 employees in its full capacity Gigafactory. Foxconn makes iPhones in China and has over 800,000 staff now and used to have as many as 1.5 million before they began heavy automation. Getting to Foxconn scale in China would be 40 to 80 Gigafactories. Foxconn is a Taiwanese company. However, I will provide reasons why China will overlook the fact that Tesla is a US company.

China could give Tesla strategic support without requiring technology transfer and other issues, just money and other help. They already did not require the joint venture split.

It could be seen as giving something in the trade war. China gets 800,000 jobs with 40 Gigafactories. The supply chain is all China’s. Exports from China would have some benefit to China.

The main benefits and reasons why China will make this move will be described below.

Why would China support Tesla and Elon Musk? Doesn’t China have a few dozen major electric car makers?

Yes, China has a lot of other electric car makers. Just like they have a lot of other smartphone makers. China still wants both Tesla and Apple to do as much as possible in China.

Global electric car sales finished October 2018 with 208,000 sales for the month (a new best-ever record month), up 75% on October 2017. China electric car sales were about 120,000 in October 2018, up 85% on October 2017. Electric car market share in China for October 2018 was 5.8%, and is at 3.6% YTD.

China Bigger Problems Take Priority and Those Problems are Air Pollution and Oil Dependence

China has three times the number of heavy trucks as the USA. China has about 22 million heavy trucks.

In 2017, 2.3 million commercial trucks were produced in China. Four million heavy trucks were produced worldwide. In 2017, trucks in China made up almost 90% of commercial vehicles and within the truck category, 1.1 million heavy-duty trucks and 229,113 medium-duty trucks were sold in the country. This three times the level in the USA. It also means about a million smaller commercial trucks. The small trucks are likely used frequently in the city along some of medium and large trucks.

Emissions from diesel trucks, which make up only 7.8 percent of automotive vehicles in China, causes 57.3 percent of nitrogen oxide and 77.8 percent of the particulate matter air pollution. Particulates are the main cause of 1.1 million air pollutions deaths per year in China.

In the US an average passenger vehicle uses 500 gallons of gas per year. A semi-truck uses about 20,500 gallons in a year. The biggest trucks use 40 times the fuel of a car. Medium and small trucks are at fuel usage levels in between cars and big trucks.

China is putting emission filters more stringent than Europe’s level 6 requirements onto all its diesel trucks over the next several years.

China has started to buy a lot of liquid natural gas-powered trucks. This shows that China is looking for even better emissions and for a diversification of energy sources. China imports 70% of their oil. These are strategic and geopolitical concerns and weaknesses.

China’s priority is fixing air pollution in cities with transportation improvement. China is also building 1-2% more city every year. You might think well 1-2% those are small numbers. In China’s case, that means adding an equivalent of a Los Angeles of city every year or two. Fixing air pollution in cities will give back 7% of GDP from air pollution damage. It will improve health and reduce health care costs.

In 2017, China’s automobiles emitted around 436 million tonnes of pollutants, including 333 million tonnes of carbon monoxide (CO), 57.4 million tonnes of nitrogen oxide (NOx), 40.7 million tonnes of hydrocarbon (HC) and 5 million tonnes of particulate matter (PM).

Huge Win for China to Convert Short Range Trucks in the City to Electric and a Huge Market for Tesla Semi-truck

So we see there is a huge need for China to convert all of its short range trucks used in and near cities to electric trucks. This would reduce air pollution and reduce oil dependence in significant ways.

Near-term the replacement of 3 to 6 million short range trucks could greatly reduce air pollution in the cities and for China and the world overall.
Eventually converting all trucks to electric would eliminate perhaps 3 million barrels per day of oil imports.

China wants to dominate the future electric car, electric truck, electric bus and battery economy.

If China has dozens of Gigafactories making Tesla electric cars, electric trucks, electric buses and batteries then China moves a lot of its economy from oil and gets rid of most of its air pollution. They get clean power and clean transportation. This will reduce global soot and gases. This will have even bigger impact when the China-Tesla industrial complex exports to fix the rest of Asia and the World.

Fixing transportation air pollution could save about 500,000 lives per year in China and prevent the loss of 7% of GDP to air pollution damage.

Obviously 3 million small to large electric trucks would upwards of $100 billion. China provides electric buses with $70,000 and similar subsidies for buses.

Getting the lithium mines and battery supply chains built are exactly the kind of massive supply chain and construction that China’s specialty.

Electric Batteries for Power Grid

By 2030, China will have twice the electrical power generation of the United States. China has a lot of pumped-hydro for power storage but fast response batteries are also needed for more solar and wind power adapted power grids.

Tesla is building about 4 Gigawatts of utility-scale battery farms for California’s power grid. China could use 100 to 1000 times that level.

The payoff for the 100MW Australia utility battery storage made by Tesla will be 20 months. The 100MW system cost Australia $66 million.

Batteries will likely be half the cost in eight years and scaling to higher production levels will also reduce costs. 4GW at Australia prices would be $2.5 billion. We assume $1 billion for 4 GW in 2025 then 400 GW is $100 billion.

Summarizing the Bigger Picture

China has huge air pollution, transportation, electrical grid, oil dependence, and energy innovation needs. Elon Musk and Tesla can contribute to faster, cheaper and more effective solutions all along the way.

China has not interfered with the prospering of Apple. Apple still has 7% of China’s smartphone market. China still makes most of the Apple iPhone which is then shipped around the world. China would be very happy to replicate the Apple situation with electric cars, batteries and grid-scale battery storage.

There will be customers and demand all over Asia especially but also in Africa and Europe.

China will be able use this path for a faster air pollution fix, millions of barrels per day in less oil usage and to be able to step to export more leading-edge technological solutions.

Subscribe on Google News