First-hand-car dealerships in China are likely to become the next big target for electric-cars maker Tesla after the company announced on Monday that it would hand over second-handed car dealers to its rival, LG Chem, for a price that is guaranteed to go up to HK$1.3 billion.
The announcement comes just days after the Chinese government announced a 10 per cent discount for electric cars on the government’s list of “high-quality” products.
The deal will see LG Chem and Tesla pay HK$2 billion for the first-hand cars, according to an industry source, which is an improvement on what was the case last year when LG Chem paid HK$3 billion for a second-generation car.
The source said that LG Chem would take a 25 per cent cut of the price for the second-hundreds of first-hundred cars, but it will also get HK$50 million in compensation for each vehicle, and a 25 percent share in the sales profits.
The new arrangement means that LG will get HK $1.1 billion from the sale of the first cars, which LG Chem was allowed to sell to LG.
But it comes at a price, which will be HK$400 million.
The HK$350 million payment is in addition to HK $150 million that LG had to pay LG Chem for its first car, and HK$250 million that it was allowed last year.
This is the biggest discount in the industry in years, said Li Hongchang, an analyst with research firm Tsinghua University.
“We expect it to be the biggest in history,” he said.LG Chem has not yet made any further comment on the agreement.