Tesla's Blowing It In China. Here's What Elon Musk Must Do

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【Summary】People’s Republic is now the world’s number one market for electric vehicles and by 2018, it will be the world’s largest market for luxury cars.

Mia    Sep 13, 2016 11:41 AM PT
Tesla's Blowing It In China. Here's What Elon Musk Must Do
Michael Dunne

Even a genius like Elon Musk could not have dreamed up a better opportunity for Tesla Motors than China. The People's Republic is now the world's number one market for electric vehicles and by 2018, it will be the world's largest market for luxury cars.

And yet, Tesla continues to spin its wheels there. Model S and Model X China sales this year will reach around 6,000 vehicles — mere wood shavings in a market of 22 million.

To pick up speed, Tesla must do what bold, ambitious, fast-moving Silicon Valley companies hate to do: Make adjustments to their approach. In China, that means making Tesla a little less aloof and a lot more likeable.

I recently visited Shanghai and Beijing and found many factors lining up in Tesla's favor:

  • China's EV and plug-in electric sales are doubling to 600,000 sales in 2016, twice the U.S. level.

  • National and local governments offer EV buyers lavish rebates of up to $15,000 per car.

What's more, there's no end of demand for luxury vehicles:

  • This year, the Germans alone will sell more than 1 million cars and SUVs priced over $50,000. Volvo, Cadillac and Lexus will each reach 100,000 sales.

  • The Tesla Model X arrives at just the right time. China SUV and crossover sales are booming, up 33%, and now account for almost 40% of total sales. The PorscheCayenne, BMW X5 and Audi Q7 are everywhere on Shanghai and Beijing streets.

So how to win more of those millions of affluent customers? Here's the key: Companies that score big in China both command respect and are well-liked. Tesla and Elon Musk already enjoy an enormous following. That's important. But when it comes to likability, the jury is still out.


Teslas charge up outside a luxury mall in downtown Beijing. Chinese Tesla owners love the car. But they're expecting better service. Photo Credit: Dunne Automotive

A little historical context: For centuries, foreign visitors paid overt homage to Chinese rulers. Kow-towing was a standard ritual. There is no longer the need to knock foreheads to the ground, but Chinese still expect appreciation. Tesla has to get more flexible here.

Here are five things Tesla can start doing today to move sales much higher.

  1. See Government As the First Customer. Understand that there are two "markets"in China: the government and the consumer. Before Tesla can win with consumers, it needs the blessing of the government. Giving bro hugs to government officials is nowhere to be found in Elon's new master plan. But it's a must in China, like it or not. Tesla needs to declare far and wide that China is the undisputed leader in electric vehicles. Tesla is simply there to support the worthy cause.

  2. Get Inside. To win in China, you must build your product in the Middle Kingdom. Mercedes, BMW, Audi, Land Rover and Cadillac all do. Tesla imports from California. China clobbers imports with punishing import duties and fees. A Model S that costs $85,000 in America runs $123,000 in China. Building a plant also gives the Chinese confidence that Tesla is committed to the People's Republic, an important perception. Tesla is reportedly hunting for a production site but needs to move faster.

  3. Close the Service Gap. Chinese Tesla owners I spoke to love their cars, but they feel shortchanged when it comes to service and personal attention. Maybe it's Tesla's aloof culture that leaves them feeling cold. Whatever the cause, Tesla must match or better the almost reverential treatment that Chinese luxury car buyers now get from likes of Porsche, Mercedes and Land Rover.

  4. Stay Way Ahead. Billionaire Chinese investors are backing new companies to develop Tesla killers. Leading names include Faraday Future, Karma, Future Mobility, NextEV and Atieva. They've hired away key Tesla talent and they'll start delivering products as soon as 2018. No doubt the Chinese government will look more favorably on their own sons once they are ready for market. Tesla must move quickly to make the most of its lead in technology and design.


LeSEE (Super Electric Ecosystem) is one of several Chinese models under development to take on Tesla. Photo Credit: Le Eco.

  1. More (American) Test Drives. Lucky for Tesla, many potential Chinese customers can be pre-sold to right here in America. There are tens of thousands of wealthy Chinese in America every day — shopping, studying, working and playing tourist. Chinese businesses invested $18 billion into the United States in the first half of 2016, an all-time record. Chinese now account for one-third of all international students in America. They have the bucks. Get them into test drives in America, which will lead to more orders when they get back home.

Tesla will win in China when Elon & Co. understand that it's not enough just to be awesome. You gotta be really likeable, too.

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