5 Reasons Why Tesla Is Struggling In China - The Sky Herald

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15 January 2015

5 Reasons Why Tesla Is Struggling In China

Tesla got crushed on Wednesday, partially due to Elon Musk breaking the news that Tesla sales in China were "unexpectedly weak" in the fourth quarter.
Echoing Musk's explanation, Tesla communications chief Ricardo Reyes told Business Insider that "misperceptions about the ease of charging Model S were the main reason for the dip" in Chinese sales.
"To clear up those misperceptions, we are explaining the ease and convenience of charging and continue expanding the charging network in the country," he said in an email. 
While Reyes said that "overall China constitutes a small percentage of our sales for now," the stakes for Tesla's venture into China look large. Already the world's biggest auto market, over 22 million cars were sold there in 2013 — accounting for over 25% of the global total. 
Former Tesla China chief Veronica Wu said in January 2014 that China would account for 30 to 35% of Tesla's global sales in 2014. She resigned in December.
The number of charging stations is indeed increasing. Quartz reports that the Chinese government has built 19,000 charging sites across China, while Tesla has placed 23 of its Supercharger stations in 10 Chinese cities.
To ramp up that infrastructure, Musk has struck deals with telecom operator China Unicom and real estate developer Soho China to build over 700 charging stations in 70 Chinese cities, reportedly giving China the second-largest charging infrastructure after the US. 
In talks with Chinese auto industry analysts, Business Insider has learned that Tesla has a host of commercial and cultural hurdles to overcome if it's going to succeed in the Chinese auto market. 
They include:
The early adopters have already bought their cars. "In any new product intro, you get a lot of buzz early, where early adopters run out and put their money down, and then you have a period where it's not new anymore" explained analyst Bill Russo, who served as the VP of Northeast Asia for Chrysler before moving into consulting. "The numbers are always skewed — the easy sales are the ones you get early on."
The early adopter pool is comparatively small. "For the people in China who bought the Model S, it's not their first car," argued analyst Jochen Siebert. "It's their third or fourth car, the same set of people who would buy a Porsche 911 — there's only a certain percent of people who want to buy this car."
Early numbers may be inflated by "scalper" intermediaries. In the same way that scalpers re-sell football game tickets at a markup, Russo explained that a scalper economy persists for auto imports in China. "When you have a limited quantity available, scalpers run in an buy a quantity of cars early on, they flip them to end users or buyers," he said. "You see high numbers in the early stage, but you're not getting a clear run rate until the market reaches level of maturity."
There's still lots of electric car anxiety. Siebert says that with any electric vehicle in China, there's the anxiety of "when and where will I charge my vehicle." Plus it's harder to do personal charging stations in the China. Quartz reported that 74% of urbanized Chinese live in apartments instead of detached homes and "park their cars in shared garages where parking operators have deemed charging stations a fire hazard." 
The consumption isn't conspicuous enough. While it seems strange, Siebert say that one of the biggest complaints about the Model S is that it's not sufficiently braggable. "When Chinese rich buy cars, they want to show off," he said. The Model S is 56.5 inches tall, so it's a fairly small vehicle. He said that "the car that Chinese love" is the muscular Porsche Cayenne SUV, which stands at 67.4 inches. Porsche sold 37,425 cars in China in 2013, and a full 26,666 of them were the Cayenne SUV — accounting for over 70% of sales.
Tesla needs to learn from that.  "The Tesla is an advertisement, but it’s not tall enough," Siebert said. "the showoff value is too low." Tesla has a better shot with the Model X SUV, slated to arrive in China in 2016, he said. With those upward-opening "Falcon" doors and a 64 inch height, it looks like a stronger bid to catch the eye of China's newly rich.  

5 Reasons Why Tesla Is Struggling In China Reviewed by Unknown on Thursday, January 15, 2015 Rating: 5 Tesla got crushed on Wednesday, partially due to Elon Musk breaking the news that Tesla sales in China were "unexpectedly weak" ...