Rising middle class may mean bright future for Tesla

By Hu Weijia Source:Global Times Published: 2019/2/24 22:10:50

 

A Tesla's Model 3 electric vehicle travels past the Morning Cindy vehicle carrier at a port in Shanghai, China, on Friday, February 22, 2019.  Photo: VCG



As US-based electric carmaker Tesla gears up its deliveries of the Model 3 in China, test drives are in hot demand at Tesla showrooms. Some customers have shown great enthusiasm for the Model 3, just like they did almost one decade ago when the iPhone 4 made its debut in China.

The enthusiasm was unexpected. Tesla sales in China sank 15.4 percent year-on-year in 2018, sparking concerns that the company is losing its charm in its second-largest market. However, the warm reception for the Model 3 suggests that the Chinese market can offer a range of opportunities for Tesla. Now, what Tesla needs is an appropriate strategy to turn enthusiasm into sales.

In 2018, sales of new-energy vehicles (NEVs) in China rose 83 percent year-on-year to surpass 1 million units, according to gasgoo. com. So, Tesla's sales decline should be attributed to the carmaker itself, instead of the Chinese market, which is the world's largest. Tesla has a good chance to make a comeback in 2019, with the delivery of the Model 3 in China.

The starting price for a Model 3 in China is set at 433,000 yuan ($64,495), which is a low-priced choice for many Chinese consumers compared with the Model X and Model S, both of which became available in China earlier. The nation's middle class is expanding at an unprecedented pace, resulting in soaring demand for accessible luxuries. It's possible that the Model 3 will help Tesla capture the Chinese market, as Apple Inc did in the past decade.

Tesla also plans to make Model 3 cars at its factory in China. The localization of production will avoid customs duties and further reduce the car's price in the Chinese market, increasing its attractiveness to the middle class at a time when the country is experiencing rapid growth in NEV sales.

This is a typical example of the rise of the consumer market in China. The rise in disposable incomes has helped make the country one of the most attractive markets for luxury brands in the world. Although some luxury brands are seeing a tough time in the Chinese market, an appropriate strategy will help them explore their potential. The Chinese market may be more important for them than previously imagined.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn

Posted in: EYE ON ECONOMY

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