Tesla cruises into China
I have to give my congratulations to new energy car maker Tesla (Nasdaq: TSLA) for creating the kind of buzz and excitement this week that only names like Apple (Nasdaq: AAPL) and smartphone sensation Xiaomi have typically been able to muster. In the last 2 days, the company and its charismatic founder Elon Musk were all over the Chinese headlines as Tesla delivered its first electric vehicles (EVs) in China on the sidelines of the nation’s biggest annual auto show happening this week in Beijing. Musk seems to have done interviews with nearly all of the major publications I regularly read, leading me to wonder if the man ever sleeps.
But all joking aside, Tesla really has done an incredible job of launching its first vehicle sales in China. I honestly haven’t seen this kind of media frenzy and hype surrounding a product launch for at least a year or two, back when Apple was still at the height of coolness in China. Tesla has also made all the right moves in terms of associations, getting its name connected with a number of big-name companies, projects and people as Musk hinted his company could consider building a plant in China.
All this buzz comes after a rocky start in China for the company, following a tussle with a trademark squatter and some initially difficulties getting its first shop set up in Beijing. What’s more, the company is at a slight disadvantage to domestic rivals like BYD (HKEx: 1211; Shenzhen: 002594; OTC:BYDDF) and Chery because its cars don’t quality for the generous subsidies being offered by Beijing to jump-start electric car sales. And yet despite all that, Tesla has managed to generate lots of buzz these last few months and has set an aggressive target of selling as many as 8,000 cars in China this year.
It officially delivered the first of those this week, as it handed over the keys to 8 of its Model S electric cars to an A-list of high-profile buyers that included the president of the Lifan soccer team and the founder of Autohome (NYSE: ATHM), the nation’s leading car information website. (English article)
Musk has also managed to get his company’s name associated with a number of major Chinese companies as he tries to send the message that Tesla will support clean energy as it helps to build the necessary charging infrastructure to support EV development. According to the various reports, Tesla’s list of potential corporate partners runs the range from Sinopec (HKEx: 386; Shanghai: 600028), one of China’s top oil refiners; to State Grid, operator of China’s national electric grid; to JA Solar (Nasdaq: JASO), one of the nation’s leading makers of solar panels.
Tesla discussed its potential local partnerships as it also revealed it is preparing to spend hundreds of millions of dollars to help to build charging stations to make electric vehicles practical in China. (English article) But perhaps most tantalizing to officials in Beijing was Musk’s hints that he could consider building an EV manufacturing plant in China, which could become the company’s biggest global market as soon as next year.
Clearly Musk has done his homework and is hitting on all the right notes in China to create a well-oiled campaign as he enters the market. Of course it also doesn’t hurt that Tesla has a very good product to sell, and that it has cultivated an image as a very environmentally friendly status symbol in this very status-conscious country. If it continues to play its cards right, which looks likely, the company could stand a very strong chance of selling at least 4,000 or 5,000 cars this year in China, making it one of the company’s top global markets.
Bottom line: Tesla’s China launch, accompanied by a well-crafted publicity blitz, could help the company sell up to 5,000 cars in the market this year.
Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.