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Tesla Steps Up its Communications With Regulators in China After Rising Customer Complaints

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【Summary】After facing scrutiny in China over safety and a high number of customer service complaints, the California company is now beginning to boost its engagement with regulators and expanding its government relations team. In response to complaints from owners, Tesla said it would set up a China data center, launch self-inspection to improve services and work with regulators.

Eric Walz    May 03, 2021 1:15 PM PT
Tesla Steps Up its Communications With Regulators in China After Rising Customer Complaints
Tesla cars built in China wait to be shipped at the company’s factory in Shanghai in Oct 2020. (Photo:cnsphoto)

Electric automaker Tesla appears to be aloof at times. Chief Executive Elon Musk frequently ingones criticism of his company and any problems with its vehicles or the capability of its autonomous driving software. To make matters worse, the company dissolved its internal PR teams in the U.S., so its difficult for media to get any important questions answered or comments directly from the company.

However in China, the government plays a large role in the safety and oversight of the auto industry. After repeated complaints from customers in China, including reports of faulty brakes on the Model 3, Tesla is in hot water with Chinese regulators and is being forced to answer to them regarding the safety of its vehicles. 

After facing scrutiny in China over safety and a high number of customer service complaints, the California company is now beginning to boost its engagement with regulators and expanding its government relations team, industry sources told Reuters.

In response to the different complaints from other owners, Tesla said it would set up a China data center, launch self-inspection to improve services and work with regulators. 

Tesla is hiring managers to update a policy database and maintain relationships with government and industry associations to "build a harmonious external environment to support Tesla's business development in the regional market." 

The recruitment advertisements were posted in April on Tesla's WeChat social media account. It was not immediately clear how many managers Tesla was planning to hire for government relations.

Pressure has been building over the past few months for Tesla to improve its mostly favorable relationship with Beijing so far. In February, Chinese regulators targeted the company over consumer reports of battery fires, unexpected acceleration and over-the-air software update failures.

In March, Tesla came under scrutiny when the Chinese military banned its cars from entering its complexes, citing security concerns over the cameras installed in its vehicles. Tesla downplayed the threat, assuring customers on Chinese social media that the cameras are not available outside of North America.

"Even in the United States, car owners can freely choose whether to turn on its (Sentry Mode) use. Tesla is equipped with a network security system with world-leading security levels to ensure user privacy protection," Tesla wrote on its Weibo account, which is the equivalent of Twitter in China.

Most recently, Tesla was targeted by state media and regulators last month after an angry customer climbed on top of a Tesla vehicle on display at the annual Shanghai auto show. The woman in the viral video was angry over Tesla's handling of her complaint about malfunctioning brakes and the incident was a form of protest. 

The woman's parents were injured in a February crash in a Model 3, which she blamed on defective brakes.

The incident drew additional scrutiny after Grace Tao, a Tesla vice president who heads its government relations effort in China, was criticized after she was quoted in a media interview questioning whether the aggrieved customer "was acting on her own."

Tesla issued a statement apologizing for not addressing the customer's complaint in a timely manner, and said it would conduct a self-inspection of its service and operations in China. Its the opposite of Tesla's U.S. strategy of ignoring customers or criticizing regulators about issues related to its electric vehicles.

Tesla's change of strategy in China shows the seriousness with which the U.S. automaker views the setbacks in China, which is the world's biggest auto market and an important one for the company to remain profitable. China is Tesla's second biggest market outside of the U.S.

Regulators in China frequently discuss industry policies and standards with global and local companies, industry associations and think tanks, as other countries do.

In China, automakers typically join these meetings, but unlike rivals Toyota and General Motors, Tesla officials were largely absent from the closed-door gatherings, according to four people familiar with the matter that spoke to Reuters.

Instead, Tesla officials regularly speak at high-profile industry tech conferences. Musk spoke at the World Artificial Intelligence Conference in Shanghai in Aug 2019. 

But Tesla executives recently attended at least four recent policy discussions, on topics including vehicle data storage, vehicle-to-infrastructure (V2I) communication technologies, EV battery recycling and carbon emissions, according to Reuters sources.

Although Tesla did not make major commitments at the meetings, it participated in some discussions, sources told Reuters.

Last week, Tesla submitted a document to authorities in Shanghai for plans to build facilities for recycling of EV battery cells and other electric vehicle components such as electric motors at its factory in Shanghai.

In the U.S., Tesla also faces scrutiny for problems related to its vehicles, but none have impacted sales or tarnished Tesla's reputation very much. 

The California company is in the crosshairs of U.S. investigators over the safety of its autonomous driving system Autopilot, which were the subject of investigations after a series of high-profile crashes involving Tesla drivers using the automated highway driving features.

Although China is Tesla's second biggest market, the company is facing growing competition from EV startups like XPeng and NIO, both of which are publicly traded companies in the U.S. Xpeng for example, was inspired by the success of Tesla, and set out to develop equally high-tech electric vehicles with self-driving features costing around half the price of  Tesla models.

With growing competition facing Tesla in China and the power of social media, it's becoming increasingly important for the company to maintain its reputation and relationships with regulators in the world's largest auto market.

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