28 October 2016
Opening or closing, the rear doors of the Tesla Model X are guaranteed to draw a crowd. Photo: internet
Opening or closing, the rear doors of the Tesla Model X are guaranteed to draw a crowd. Photo: internet

Tesla wants factory in China this year

Tesla Motors Inc. chief executive Elon Musk hopes to have a factory in China to produce electric vehicles by the middle of this year.

Musk told tech website Engadget the company is “doing reasonably well” in mainland China, where it has 15 outlets in seven major cities.

He said there are 340 Superchargers and more than 1,600 destination chargers throughout China.

Hong Kong has 42 Superchargers, making it the city with the highest density of Tesla’s rapid-charging stations in the world.

By comparison, Los Angeles has only four, and New York City doesn’t even have one.

That’s probably why Tesla sold 2,221 of its Model S cars in Hong Kong last year, over 80 percent of all electric cars sold in the city.

To put things into perspective, that’s 4.39 percent of Tesla’s total global shipments, Engadget said.

Tesla, which had Model S global sales of 50,366 last year, will report year-end details next month, but analysts guesstimate that unit sales easily exceeded 4,000 in China, based on deliveries of 3,025 over the first three quarters of the year.

Musk thinks he can sell even more and believes that a local production facility could cut the price of Tesla cars by about a third.

The base Model S sells for US$76,000 in the United States and US$106,000 in mainland China after import duties and shipping costs.

Tesla makes most of its cars in Palo Alto, Calif., where the company is also headquartered.

Barring the company’s overhyped launch in China in 2014, which led to excess inventory in the market, business prospects for Tesla in China look very promising.

“We expect order growth in China to remain strong, with more store openings and the recent policy changes in Beijing and other major cities that allow buyers of Tesla vehicles to bypass license plate restrictions,” Tesla said in a shareholder letter.

Ironically, if there’s one barrier to reckon with, it’s the base price of “only” US$76,000, give or take.

Tesla’s competitors in the full-size luxury sedan category — Audi, BMW and Mercedes-Benz — all have production facilities in China and price their cars at a premium, roughly double the profit they would get in the US, The Motley Fool, a stock news and analysis website, said.

Even at current prices, rather than going head-to-head with an Audi A8, BMW 7 series or Mercedes S-class, the Model S goes head-to-head with mid-luxury and compact executive cars.

While you and I might consider that a bargain for what Motor Trend called the Car of the Year in 2013, it’s a different story for sometimes fickle Chinese consumers.

Competitors could “try to convince Chinese consumers that our relatively lower price tag means Model S is a lesser car”, Musk said in a blog post acknowledging Tesla could charge more.

“We’re betting on doing the right thing and that consumers recognize … that we’re not taking advantage of them,” he said.

“We care about fairness, we care about transparency, and we care about advancing the cause of electric cars in China.

“And we care about doing the right thing for our customers — no matter where they live.”

Musk has not said who Tesla’s local production partner might be or where the facility will be located.

In Hong Kong for a technology forum, Musk meets Chief Executive Leung Chun-ying Tuesday to discuss bringing Tesla’s full autopilot package to drivers in the city, a local newspaper reported.

As a well-deserved “reward” for local Tesla fans, Musk confirmed to Engadget that the Model X will be headed to the city in the second half of this year, along with the opening of a new service center.

I recently had the chance to test drive a Model X, which Tesla calls “the safest, fastest and most capable sport utility vehicle in history”.

I don’t know much about cars, so I won’t even try to give you a review outside of a few remarks.

First, the Model X is, without a doubt, badass.

Second, the Model X is crazy fast and drives like a Model S (only you’re sitting about a foot higher).

Last, the front doors open and close by themselves (cool), and the rear falcon-wing doors draw a crowd (cool and uncool at the same time).

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A strategist and marketing consultant on China business

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