Published on January 30th, 2014 | by Christopher DeMorro1
Tesla’s China Strategy Faces Big Obstacles
Tesla Motors is making the first steps into the Chinese car market, and this could be a huge move for the fledgling car company. Yet China presents a unique challenge to Tesla, like high-speed trains, lack of charging infrastructure, zero government support, and a lack of brand history. Can Tesla overcome?
China, which is the world’s largest market for new cars is the next big step for Elon Musk’s plan for world domination. China has an especially ravenous appetite for luxury vehicles, which could help the People’s Republic become Tesla’s largest market. The Tesla Model S will carry the same price In China as it does in America, plus import taxes and fees, in what Tesla calls a “fair price” scheme. Similar cars sell for three times as much or more than the Tesla, which is still only within reach of China’s wealthiest citizens.
That means the lack of government incentives isn’t much of a big deal, as anyone who can afford a $121,000 car in China probably isn’t concerned with fuel economy or car tax credits anyways. A bigger problem, however, is the lack of charging infrastructure. No doubt Tesla is already planning the first steps for a Supercharger network running between China’s largest coastal cities, but outside of that many municipalities lack even basic EV charging options.
It gets worse for those wealthy Chinese who live in one of the thousands of luxury high-rise apartments that offer basic parking by no charging facilities. The Chinese government isn’t doing nearly enough to help support electric cars either despite absurd levels of pollution and traffic congestion. On the same token though, China offers high-speed trains that can cross the entire country in the time it takes to watch one-and-a-half Martin Scorsese films (about 5 hours).
So even if a Supercharger network is put into place, that doesn’t solve the problem of traffic congestion or the fact that there are other, faster options other than driving. China, like America, loves convenience, but it isn’t nearly as prepared as we were for electric vehicles.
But the biggest problem Tesla may face is a branding problem. While other luxury brands like Mercedes and Porsche have a hundred years of history and prestige to draw on, Tesla is baby of a brand, and one that isn’t nearly as well known in China as it is here. Elon Musk has a way of dominating headlines and putting Tesla on the front page, and I don’t doubt his ability to generate buzz around the Model S. In a country of more than 1.3 billion people, there are surely enough potential buyers to make a business case for Tesla.
But will it really be the biggest market for the world’s best electric car? Right now saying such things seems far-fetched, especially given the uncertainty of how China will solve its epic pollution problem. If EVs aren’t on the table when whatever reform the government enacts is signed, Tesla could end up the small fish is a huge pond.