Chao Lu

Chao Lu

Oct. 30, 2026

Tesla, China, Electric vehicle market, Foreign investment, Competition, Industrial policy.

This essay discusses the economic effects of Tesla’s entry into the Chinese electric vehicle (EV) market. The driving force behind the automobile policy of Tesla’s Shanghai Gigafactory was the entry of a wholly owned foreign car firm into the nation’s automobile industry. The entry of Tesla into the Chinese electric vehicle market had short-run effects on the local electric automobile market such as insufficiency of the market price and competition in the automobile network; other effects included competition in the market automobile brand. The effects were long-run economic positive effects on the Chinese electric market that stimulated demand in the market and increased efficiency of the market, developed the local electric margin chain system in China, and induced innovation of the local market. This paper argues every economic effect of Tesla’s entry into the China electric market did not have a negative effect in the electric market in the long run except the hard competition Tesla faced in the transform EV market that was dynamic and in contention with the world electric vehicle market. Hence, the China policy must stance an approach that allows entry of foreign investment, the capacity of local R&D and infrastructure to enter the international expansion of the local brand EV auto.

© 2026, the Authors. Published by ISCCAC

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