Tesla Plans to Enter China Luxury Car Market Later this Year


Tim Dunne

Tesla is building its first electric car store in Beijing, China, in spite of two major challenges: a very limited charging infrastructure and intense competition in the luxury segment from Audi, BMW and Mercedes-Benz.

The new Tesla “lifestyle store,” which is slated to open later this year, is located in an exclusive upscale Parkview Green mall, according to a report in China Car Times. The footprint for the new Tesla showroom is 8,000 sq. ft., which is roughly three times larger than its showrooms in the U.S.

In a recent interview with the San Jose Mercury News, Tesla CEO Elon Musk suggested that entering the China market is a “wild card” in the company’s future. China is the world’s largest auto market and the new showroom is being built in Beijing’s equivalent of Rodeo Drive in Beverly Hills, CA, according to Mike Omotoso, senior manager of global powertrain forecasting at J.D. Power’s strategic partner LMC Automotive. He told the Mercury News that “the Model S may be a good way for Chinese buyers to say, “I’m wealthy, but also environmentally responsible.”

This may be especially helpful since smog and air pollution are major problems in China, and the government is a strong supporter of electric vehicles, especially those from domestic producers, including BYD. Tesla already has a service center in Hong Kong to help owners of the discontinued electric Roadster and to also take orders for the Model S. However, Hong Kong is a different market from the mainland of China—a wealthy island state with short driving distances that are ideal for an electric car.

Tesla already is selling its Model S in the U.S. and deliveries have just begun in Europe.

13-Tesla-ModelS-06Musk has said in news reports that he projects annual sales of 10,000 Model S electric cars in Europe and about 5,000 units in Asia—or much more.

Currently, there are no incentives from China’s government for imported EVs and the Tesla Model S is likely to be subject to substantial import and luxury vehicle taxes. Some auto industry experts also are concerned about protection of intellectual property in China with the Tesla Model S and the possibility of “knock offs.”

Meanwhile, Tesla surprised the business media and reported much stronger second-quarter results than anticipated. Earlier, Bloomberg News suggested that results might be in the red for the second quarter due to a lease finance program and expansion into Europe cutting into revenues. Tesla’s stock has more than quadrupled in the past year. On August 14, Tesla Motors was trading at $139.74 per share.

Through July, Tesla has delivered 11,477 Model S midsize premium conventional electric cars in the U.S. market, up from 207 in the same seven months a year ago. In July, Tesla sold 1,822 Model S cars, which was slightly down from 1,908 deliveries in June, according to tallies from J.D. Power and LMC. The Tesla is selling exceptionally well in southern California, where warm weather, a concentration of wealth, and a general predisposition to environmental awareness and protection converge to make the car a popular alternative for new car buyers. Tim Dunne, director of automotive analysis at J.D. Power


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