16 February 2019

Tesla jumpstarts China expedition with pre-orders

No set price and time of delivery plus an advance deposit of at least 250,000 yuan (US$41,035). Most vendors would be hard-pressed to sell anything on such demanding terms. But not Tesla Motors (TSLA.US) in China.

The US e-carmaker has secured “more than 300 pre-orders”, mainly for its signature sedan Model S, since it made prior reservations available in the country in late August, according to an interview Zheng Shunjing {鄭順景}, a senior executive overseeing China operations, gave to the Economic Weekly.

Tesla has hit one roadblock after another in China but at least it can now take comfort from the enthusiasm among buyers there. Another breakthrough is the opening last month of its 800 square meter store-cum-gallery in an upscale mall in downtown Beijing, the firm’s first foothold in China.

Media reports say the store was swamped by crowds of visitors eager for a look at the sleek models and to put their name down for a test drive. But, it may come as a surprise to potential buyers to learn that Tesla’s Beijing store is not yet allowed to sell cars.

The firm hasn’t finished its application for business registration to set up a sales subsidiary and obtain related safety certifications.

The firm simply can’t make any promises because it is still digging its way out of China’s regulatory maze of ministries and government departments — from the Ministry of Commerce and the Ministry of Environmental Protection to the General Administration of Quality Supervision, Inspection and Quarantine, none of which are easy to please.

Analysts say one major impediment is Tesla’s non-dealer direct-selling business model which is running up against China’s tough legislation against direct sales that does not exempt cars. The company is also awaiting the regulatory nod from the State Administration of Taxation as well as the State Administration for Industry and Commerce.

That said, it’s noteworthy that some senior officials, like Science and Technology Minister Wan Gang {萬鋼} and former National Energy Administration director Zhang Guobao {張國寶}, are not shy about applauding the firm’s technical and marketing expertise. And officials from the National Development and Reform Commission, the Ministry of Commerce and the General Administration of Customs visited Tesla’s headquarters in Palo Alto, California last month.

It is also rumored that Tesla will partner a Chinese carmaker and transfer some of its core battery-charging technology as bargaining chips for approvals. BMW i, the German auto giant’s e-car series, was soon given the go-ahead when it promised cooperation with Brilliance China Automobile (01114.HK) to promote the latter’s development of its own electric vehicles.

Tesla CEO Elon Musk noted at the firm’s results announcement this month that Chinese buyers who have paid the advance deposit will get their cars no later than February and the final price, including tariffs and duties, would be within two million yuan, hinting that all the obstacles will be cleared by then.

– Contact the writer at [email protected] 


EJ Insight writer

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