Tesla faces bumpy ride in China

Tesla faces bumpy ride in China

BEIJING, Feb. 22 (Xinhua) — Like Steve Jobs, the founder of Tesla Motors Elon Musk is called a genius and is highly skilled in hype.

With its high-profile debut, the Tesla seems to harbor ambitions to refuel China’s struggling new energy vehicle market. The company has engineered publicity stunts and stimulated stocks on the country’s sluggish A share market.

China, with its abundant local policy hurdles, is proving a hard nut to crack for the U.S. upstart.

As part of Tesla’s marketing strategy, the model S, the carmaker’s pride and joy, was priced at 734,000 yuan (121,300 U.S. dollars), half the price of an equivalent imported gasoline sedan, but still too high to intrigue China’s price-savvy buyers. The model S is nearly three times the price of China’s own electric sedan, which will certainly put a damper on Tesla’s sales.

Besides, Chinese consumers appeared to be uninterested in expensive environmentally friendly cars, Jia Xinguang, a seasoned auto analysts said.

Jia noted that buyers were more inclined toward gasoline vehicles that provide a better driving experience at the same or lower price.

The disinterest was directly reflected in sluggish sales of pure electric and hybrid vehicles last year, accounting for less than 0.1 percent of the market and contrasting sharply with total vehicle transactions.

In 2013, 22 million new cars rolled onto Chinese roads, China’s fifth straight year as the world’s biggest auto market. Tesla is out of step with China’s automobile boom, despite the expected explosion in new energy cars, top-down government aid, stronger environmental awareness and a threatened energy crisis.

The company’s marketing strategy might work in the U.S., but is misfiring in the Chinese market.

Unlike Tesla, China’s leading carmakers have put electric coaches, taxis and inexpensive private sedans as their main new-energy products, the government’s priority in the new energy era.

“Actually, no automakers in China consider electric sedans for individual customers a major development strategy, not to mention luxury cars for high-end buyers,” said Zhong Shi, another auto industry analyst.

Chinese government has supported the new energy vehicles with subsidies to carmakers and making it easy for buyers to register them. This has mainly benefited the electrification of public transportation like taxis and buses. Promotion is easier in those government-led fields.

By the end of 2015, China plans around 300,000 new energy vehicles in 40 cities, over ten times last year’s sales. Analysts expect the increase to mainly be in electric buses and taxis, not luxury sedans.

In response, Tesla is reportedly thinking about opening plants in China and launching models at a range of different prices, to win both the hearts of Chinese car buyers and the preferential policies of the Chinese government. In that case, Tesla will feel the pressure of fierce competition and local protectionism, inevitable during the localizing process.

Tesla’s leaders still have faith in their Chinese future and expect it to contribute greatly to their global revenue.

Tesla’s 2013 revenue increased nearly five times to 2 billion U.S. dollars on a GAAP basis, with an overall loss of 74 million U.S. dollars, way better than expected.