Detroit Electric $1.8 Billion Investment Threatens Tesla In Electric Car Market

The Tesla Roadster, the world's first highway-capable all electric car available in the United States.

Detroit-based car manufacturer Detroit Electric just got a big boost in confidence and finances from Chinese electric company Far East Smarter Energy. The Chinese firm just invested $1.8 billion in Detroit Electric, which could help the auto manufacturer once again become competitive in the electric vehicle market.

Detroit Electric made headlines back in 2013 when it began promoting its work on electric sports cars that were supposedly every bit as fast and powerful as their gas-burning counterparts. As Engadget reports, production delays and the rise of Elon Musk-backed Tesla Motors in the electronic vehicle industry sidelined Detroit Electric.

All of that could change now, but there is still some speculation that the cash infusion won’t be able to save the company and that its ambition might be greater than its financial backing and infrastructure can support.

“[I]t’s the longer term plans that are more likely to raise eyebrows,” reports Engadget on the Detroit Electric and Far East Smarter Energy partnership.

“The two companies are planning both an all-encompassing new facility (both design and production) and hope to develop an electric SUV that could be ready for production as soon as 2018. A third vehicle would launch in 2020. Suffice it to say that this is aggressive, if not optimistic. Even a fast-moving company like Tesla takes years to get an EV ready, let alone a relative newcomer that has yet to make a big splash with its first model.”

Despite his skepticism, Fingas acknowledges that the partnership definitely presents opportunities for both companies, and possibly poses a competitive threat to Tesla and other brands in the market.

“However, the joint venture is nothing to sneeze at. That’s a lot of money for a young car company, and a Chinese partner could help Detroit Electric succeed in that country’s increasingly hot EV market. Detroit Electric is getting the kind of financial nudge that many fledgling car builders only dream of. The tricky part is spending that money wisely to avoid the troubles that some of its rivals face.”

Tesla, meanwhile, is continuing production of its models of electric vehicles while also pushing to change the way cars are sold to the public — with those proposed changes benefitting Tesla, of course.

Tesla has lobbied to change laws regarding how vehicles are sold through franchises and dealerships in several states, with an eye towards making it easier for dealers to sell directly without having a franchise that binds to particular auto manufacturers.

“When Tesla is trying to push for new legislation to allow its direct sales model in a state that is banning it, the automaker generally tries to ask for an exemption for automakers selling electric vehicles or for automakers that never had third-party dealerships,” electric vehicles news site Electrek reports. “It attracts less opposition – or justified opposition – from local car dealers. But that approach didn’t work in Texas so the company is trying a different one. Tesla is now supporting a new legislation in the state to allow all automakers to sell directly, which franchise dealers are already calling the end of [their] world.”

The new approach makes it more difficult for critics to accuse Tesla of seeking preferential treatment, a implication frequently lobbed at Tesla when it sought exemptions solely for dealers selling electric vehicles. Ultimately, Tesla may be inadvertently doing some work for Detroit Electric and its other competitors. If Tesla succeeds in easing restrictions on direct sales, and if Detroit Electric gets back on its feet, when Detroit Electric is ready to start shipping cars to multiple states, Tesla will have already cleared some of the path for them to get into dealerships.

[Featured image by Vince Bucci/Getty Images]