(Original headline: If Tesla Wants to Go Mainstream in China, It Needs to Cut Prices)
(Photo: Tesla charging point for a shopping mall in Shanghai. As of the end of September this year, Tesla has sold a total of 12,000 cars in China. Now the company is negotiating with the Shanghai government to invest and build factories in Shanghai. The new factory is expected to be completed soon, with an annual production capacity of up to 150,000 units. Photo: CHANDAN KHANNA/AGENCE FRANCE-PRESSE/GETTY IMAGES)
Netease Technology News, October 25 — According to a report by "The Wall Street Journal," Tesla, once considered a high-end electric vehicle brand, is gaining more attention in China. Recently, news about Tesla's talks with the Shanghai government to establish a local factory has sparked renewed interest. Many are now questioning whether Tesla’s current popularity in China is enough to support such a large-scale investment.
Yale Zhang, managing director of Automotive Foresight, a Shanghai-based consulting firm, believes that while Tesla has been profitable among high-income buyers who value the brand, it needs to lower prices to reach the mainstream market.
With strong demand for premium imported vehicles and growing interest in electric cars, Tesla has finalized an agreement to open its first overseas factory in the Shanghai Free Trade Zone. This news was reported by foreign media over the weekend. In fact, Tesla had already announced in June that it was in negotiations with the Shanghai government for this project.
Tesla CEO Elon Musk enjoys a strong celebrity status in China. Chinese media often praise him for his technological vision. His influence helped Tesla become the only foreign automaker to enter the Chinese electric vehicle market without establishing a local joint venture.
According to Ev-sales website data, Tesla sold approximately 12,000 units in China during the first nine months of this year, surpassing the 12,000 units sold in 2016. Although Tesla hasn't released exact sales numbers, it revealed that the Chinese market contributed $1.1 billion in revenue last year, making up 15% of its total $7 billion in sales — second only to the U.S. market.
China imposes a 25% tariff on imported cars, which significantly increases the cost for Chinese consumers compared to American buyers. For example, the popular Model S starts at RMB 708,900 (around $106,800) in China, while the same model is priced at $74,500 in the U.S.
Zhou Lixun, owner of an automotive parts company in Beijing, recently spent RMB 1.1 million to buy a Model X for her business partners. “There are other electric car brands available, but none are as high-end. We see Tesla as high-tech and it makes us feel younger and more fashionable,†she said.
Tesla is currently trying to attract a broader audience. According to insiders, the company’s strategy is to become the first foreign automaker to fully own a factory in China. Unlike many foreign companies, Tesla is not partnering with local firms. This decision is driven by concerns over technical secrecy and the desire to keep all profits within the company.
However, building a factory in the free trade zone does not eliminate the 25% import tariff. The Shanghai government has not commented on this issue. The high price of Tesla cars could also hinder the sales of the upcoming Model 3 in China, which is priced at $35,000 in the U.S., though the Chinese price remains uncertain.
“Potential customers care about their money,†said Zhang Yu, a local analyst.
Tesla prioritizes control over pricing, which may eventually make it difficult to sell enough cars to justify the factory in China. With the rising wave of new energy vehicles in China, local competitors—free from import tariffs—can offer more affordable options to a wider audience.
Other foreign automakers are also entering the Chinese market. Last week, Volvo’s performance brand Polestar launched its first model in Shanghai. The car will be manufactured locally to avoid tariffs, and the company claims it will directly compete with the Tesla Model 3.
Currently, all Tesla models are produced in the U.S. and take about a month to arrive in China. Once they clear customs, it takes another two weeks before delivery. A Tesla dealer in Chengdu said that consumer demand for Tesla is already very strong, and local production is expected to boost sales further. (Sun Wenwen)
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