As regulations tighten, China has become the largest supplier and consumer of EVs, with 707,000 manufactured in the country by Chinese and global automakers in 2016, according to consultancy McKinsey.
Tesla vehicles have been especially popular in China, rising to $1.07 billion in sales in 2016 from $319 million in 2015, according to a company SEC filing. Musk has told investors the company is in talks with local regulators to build a factory in Shanghai. Such a plant could cut shipping costs and vehicle prices, which can be up to 50 percent more expensive in China than in the U.S.
During a call with analysts this month to discuss third-quarter earnings, Musk said Tesla won’t spend major capital in China until 2019, with vehicle production beginning in about three years.
“It’s really the only way to make the cars affordable in China,” he said. “But it’s really three years out.”
Volvo has three manufacturing operations across China that produce the S90 sedan with plans to build upcoming 60- and 40-series vehicles. The company is also building a production center for Polestar vehicles in Chengdu, China, due to open by mid-2018. The country has become Volvo’s largest market, with 90,930 vehicles sold last year.
“It’s not just the U.S. Volvo’s looking at. It’s also China,” Sullivan said. “One thing Volvo has going for it is a great distribution network, something Tesla still doesn’t have.”
With its Polestar subbrand, Volvo is branching out of its traditional customer base to a more niche, performance-minded buyer. The Polestar 1 is among the vehicles announced for the subbrand’s lineup.