Auto Industry

Problems charging

Elon Musk fends off Chinese client complaints

Elon w

Musk causes a stir in Beijing

Elon Musk’s sales skills are legendary. Over the years he has made ideas like colonising Mars or sending passengers from San Francisco to Los Angeles in a vacuum tube sound plausible. The Economist says that he could “sell refrigerators to Eskimos”.

And sales were very much on Musk’s mind when Tesla’s founder and chief executive arrived in Beijing on Tuesday to hand over the first nine of his electric cars to Chinese buyers.

During his trip Musk gave press interviews almost around-the-clock to discuss Tesla’s plans for its business in China. One of the strategies he has in mind is localising production within four years, he says.

As WiC reported in issue 206, the Palo Alto-based carmaker announced in January that it would start selling its Model S for $121,000 in China. Musk has said Tesla hopes to sell as many as 8,000 vehicles in China this year.

But Tesla has had problems releasing its cars to its launch customers and last week Oriental Morning Post reported that 23 angry customers have lodged a complaint for delayed delivery of their orders. One of those complaining was Wang Lifeng, boss of a car rental firm, who said he placed an order for 100 cars in January, putting down about $41,000 each for the first 10, and $1,600 for the remaining 90. Wang claims that Tesla has asked him several times since to cancel the order.

Why? Tesla has said that it won’t deliver vehicles outside the cities of Beijing and Shanghai – even though it has accepted deposits from the buyers – until it is sure it has the right technical support and battery charging facilities in place.

“If there is no service centre within a short distance from someone’s house and we haven’t resolved any charging question marks then there’s a high risk that they will not have a good experience,” Musk says.

Tesla faces unusual problems in China. “We just don’t see demand as being a constraint,” Musk adds. “It’s more [about] scaling up production and ensuring the charging and service infrastructure in China and elsewhere is in good shape.”

Charging infrastructure is an issue not only for Tesla but for other electric carmakers too. There is still a severe shortage of public places to recharge batteries. Even the city of Shanghai only has few hundred charging stations, says consultancy AT Kearney. High upfront investment costs and low financial returns mean that state utility providers have had little incentive to build the stations that carmakers are calling for.

In response, Tesla says it plans to send its own technicians to customer homes or workplaces. There they will install an electrical wiring plan at designated parking spaces. Musk adds that he hopes to build solar-powered charging stations in Beijing and Shanghai later this year.

At the Auto China show in Beijing this week, Nissan unveiled its own Venucia electric car, a model produced with its joint venture partner Dongfeng Motors. Audi, the luxury brand of German carmaker Volkswagen, also plans to enter the green car market with a plug-in hybrid. Tesla will also face competition from Daimler, which has partnered with local carmaker BYD to make Denza, another electric car. Daimler says Denza is eligible for local government subsidies and will go on sale in September priced at Rmb369,000 ($60,000). Consumers could save as much as Rmb120,000 on the sticker price with the subsidies, says 21CN Business Herald.

Musk certainly has high hopes for China, claiming it could become Tesla’s biggest market as early as next year, and promising to spend “hundreds of millions of dollars” building charging outlets.

Meanwhile, he turned on the charm with his aggrieved Chinese customers, telling the Wall Street Journal that he had spoken to the group personally to allay their concerns.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.