Tesla’s gamble will pay off amid trade war: experts

By Xie Jun Source:Global Times Published: 2019/12/1 20:13:39

Chinese customers ready to buy locally made Model 3s

A Tesla Model 3 on display in Shanghai on Sunday Photo: Xie Jun/GT

Chinese customers are ready to pay for Tesla's Model 3s assembled in its Shanghai plant, as the US carmaker made a dash to advertise its electric cars before delivering the first batch in January or early February, Tesla's salespeople said on Sunday. 

Elon Musk's investment in China, made at a time when the two countries' relations are imperiled by the lasting trade war, will pay off with costs reduced and brand image enhanced in the world's largest electric car market, experts said on Sunday.

In a little more than one week since Tesla unveiled its first made-in-China Model 3s at its showrooms across China, feedback from local customers is positive, said a salesperson at one of Tesla's stores in Shanghai. 

"Now more than half of Tesla's recent orders are for the locally made Model 3s," the salesperson, surnamed Jin, told the Global Times. He didn't reveal how many made-in-China Model 3s were sold at his store or by Tesla recently. Tesla didn't reveal the presale number either on Sunday. 

At another Tesla store also located in downtown Shanghai, a salesperson said that local customers had worried that the made-in-China Model 3s would be inferior to made-in-US cars in quality, but such worries have eased after Tesla displayed the China-built cars in the stores, allowing customers to have firsthand experience. 

"Actually the first batch of locally made Model 3s will be nearly the same as the overseas version in performance, although Tesla will switch to made-in-China battery cells, which will reduce the endurance mileage a little bit," he said on condition of anonymity. 

The Global Times saw in the store from 12:30-1:30 pm on Sunday that the white China-built Model 3 attracted more inquiries than a US-made Model 3 displayed by its side. Many visitors inquired about details and reserved times for test drives.

Both the salespeople told the Global Times that after the company starts delivering China-built Model 3s soon, the made-in-US Model 3s will no longer be sold in the country. The last batch of imported Model 3s will be delivered in China at the end of this month. 

Tesla's plant in Shanghai, built in less than 10 months, is the company's first plant outside of the US and also China's first plant wholly owned by a foreign carmaker. It shows what some overseas media have called Elon Musk's bet on China's electric vehicle market to make the carmaker profitable. 

He made the bet at a hard time, when the US and China are embroiled in a protracted war that resulted in fluctuating tariff levels and when the US government has called for US companies in China to return back home. 

But experts are mostly optimistic about the future of the US carmaker in China as it moves toward a localization strategy, although they said that challenges remain for the new brand that targets affluent consumers.

A prominent challenge comes from rising competition, as companies, whether traditional automobile giants or domestic carmakers, beef up efforts to launch electric cars for the rapidly evolving market in China.

For example, domestic electric car brand NIO will launch an ES6 Coupe later in December that will compete against the Model Y. Xiaopeng will deliver an electric vehicle called P7 in 2020, which is to be sold at a cheaper price than the Model 3 but with a longer mileage. 

"I think an even bigger threat will be coming from the traditional carmakers, such as Volkswagen and Audi, which are scrambling to shift to the electric car arena. With their ample technological reserves and abundant funds, they should make strong competitors to Tesla," Wu Shuocheng, a Shanghai-based car analyst, told the Global Times on Sunday. 

But overall he sounded optimistic about the future of Tesla. "Localization would reduce the cost of production for Tesla that will give it a price edge. As to quality, I believe Chinese customers will gradually find that the quality of made-in-China cars is no worse, or perhaps even better, than cars made in the US," he said.

The made-in-China Model 3 is priced at 355,800 yuan ($50,595) now, about 8,000 yuan cheaper than its US equivalent. 


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