Tesla's Popularity Wanes in China; Sluggish Sales Drag Down Global Performance
Yicai Global
/SOURCE : Yicai
Tesla's Popularity Wanes in China; Sluggish Sales Drag Down Global Performance

(CBN - Global) April 11 -- Tesla's popularity has waned in China over the last two years and disappointing sales in the China market have dragged down Tesla's overall global performance.

US electric automaker Tesla Motor Inc.'s [NASDAQ:TSLA] latest one-of-a-kind vehicle, the Model 3 sedan, was unveiled in China on April 1. Owners of its Model S or Model X cars were given priority to pre-order the Model 3 for a CNY8,000 (USD1,238) deposit per order. However it is not yet known how many pre-orders will be made.

While the Tesla Model 3 has received rave reviews in the US, its reception in China has been lukewarm so far.

Disappointing sales in the Chinese market forced Tesla to revise its sales target down to 50,000 from 55,000 vehicles last year. Tesla only sold around 4,000 autos in China in 2015, less than eight percent of its global sales of 50,500 vehicles. This accounted for only a small fraction of the 330,000 new energy vehicles sold in China last year.

This is still an improvement on the 2,499 vehicles sold in 2014, but the numbers fall far short of Tesla CEO Elon Musk's expectations.

When Tesla first entered China in 2014, Mr. Musk predicted that China would surpass the US as its biggest market, and would contribute one third of its sales. In which case, Tesla's sales goal for the year 2015 should have been 16,800 vehicles. Mr. Musk admitted that Tesla's performance in China last year was 'unexpectedly weak.'

Basic issues persist. First and foremost, the electric current required to charge a Tesla car is very large, and units are not compatible with ordinary household power or even a general charging post. This led to the world's first incident of an owner being unable to charge his car at a Tesla Supercharger station in Shanghai in March.

Secondly, Tesla's vehicles are considered to be imports and do not qualify for subsidies from the Chinese government. The Tesla Model 3, for example, is priced at USD35,000 in the United States. Yet in China the same car costs CNY350,000 (USD54,000) once shipping costs, import duty of 25 percent and VAT of 15 percent have been factored in.

Finally, competition from Chinese automobile companies in the industry is keen. Domestically-manufactured electric vehicles are able to achieve 300 kilometers of continuous operation, and their price for each unit is one-tenth of the Tesla Model S, at around CNY80,000 to 90,000.

In the last three years, Tesla's China operation has changed general manager three times.

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