China is trying to build an empire of electric cars — but the strategy has one huge flaw that will benefit Tesla

REUTERS/Stringer

The Chinese government is going all in on electric cars. After all, China is currently plagued with some of the worst air pollution in the world.

It's also one of Tesla founder, Elon Musk's prime targets for the company's global expansion.

While the Silicon Valley-based automaker has made a name for itself selling high priced, high performance electric cars, Musk's goal has always been to become more like Henry Ford than Enzo Ferrari.

This means Tesla's future will be in the production of mass market vehicles for the everyday consumer rather than niche luxury supercars.

However, the real growth in China's electric car market has been in the form of something a considerably more pedestrian than even Tesla's slowest model — the low speed electric car or LEV.

According to Bloomberg's Adam Minter, the Chinese government is going as far as regulating these cars with a top speed of just 43 mph.

"The boom in low-speed electric vehicles (or LEVs) is an unplanned disruption in a Chinese auto market accustomed to central planning," Minter wrote.

"LEV makers are out-innovating and out-selling their upscale electrified counterparts. Production of LEVs is growing quickly, and sales exceeded 300,000 in 2014, accordingto state media, far outpacing estimates of traditional electric-car sales."

REUTERS/StringerAt the same time, Tesla's China sales have been tepid at best and will likely remain that way for some time. But Elon Musk need not worry. The Chinese government is fully committed to electric cars. Plus, the LEV and Tesla's consumer base will likely have little to no overlap.

Much of China's LEV market is aimed at the country's rural and secondary or tertiary cities. They will be crucial in replacing the millions of dirty two-stroke gasoline powered vehicles as well as tiny Kei car-based city runabouts prevalent throughout China. Furthermore, many of these LEVs will be deployed as taxis and commercial vehicles.

Tesla, on the other hand, will target a decidedly more affluent and urban clientele. The middle and middle-upper class of China's megacities are not pining for the chance to buy an LEV golf cart. But, they may one day, dream of owning a shiny new Tesla.

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