China Consumer

Bargain battle

Tesla furious as e-commerce site discounts its cars


Not available on Pinduoduo...

When the world’s biggest companies engage in competing advertising campaigns, it rarely does their brands or financials too much harm: quite the contrary, in fact.

Take Audi and BMW. The two German car companies once tried to outsmart each other with competing billboards on a chess theme. Audi said that BMW’s ‘pawn’ of a car was no match for its ‘king’. BMW retaliated with a billboard nextdoor that simply said ‘checkmate’.

Might Tesla and Pinduoduo benefit from a marketing spat, triggered by the Chinese e-commerce platform? Pinduoduo ran a promotional campaign offering a 13.7% discount on five of Tesla’s Model 3 cars. “The subsidy’s real and so is the car,” ran the tagline.

Tesla was not happy, seeing the campaign as a “stunt”. It only sells its cars – undiscounted – directly from its own website and showrooms. It accused Pinduoduo of “malicious marketing”. The Chinese firm then countered that Tesla was being “arrogant”. But some netizens think that both companies will benefit from the publicity the row has generated. “This kind of so-called conflict is a win-win for both,” wrote one. “Everyone knows that social media traffic reigns supreme. Our comments are the stepping stones for these kings to lay the foundations of successful branding.”

Social media commentators agreed that this is definitely how Pinduoduo sees it. The US-listed platform is still trying to turn a profit, and is seeking to move upmarket by offering higher-quality items to attract more customers from tier-1 cities. What better brand to help it make that perceptional jump than Elon Musk’s Tesla?

Pinduoduo’s second quarter results, which were released this week, showed that it added 55 million active buyers between May and June, bringing the total to 683.2 million. More pertinently, nearly half of them came from tier-2 cities and major urban areas like Beijing, Chengdu, Hangzhou, Shanghai and Tianjin.

This suggests Pinduoduo is having some success shedding its image as a site that sells cheap goods to lower-income customers in poorer cities and smaller towns.

Tesla has a very different view of the situation. Premium branding is all about persuading customers to pay more for the product. The Chinese press reports that in mid-August Tesla cancelled the delivery of a car purchased via the Pinduoduo campaign when the buyer told the sales rep that Pinduoduo would be paying the outstanding balance.

Netizens stand firmly on Pinduoduo’s side on the dispute, however. “I love Pinduoduo’s subsidy,” commented one. “My only concern is when it will do this again,” voiced another. “I’m waiting for it.”

Tesla was also castigated online for failing to deliver the car, with netizens remonstrating that Pinduoduo hadn’t violated any of the car company’s rules and regulations in the way that it alleges. It simply “found an innovative way to exploit a loophole,” one remarked.

Consumer rights experts in China broadly agreed. Chen Yinjiang at the Consumer Protection Law Research Association told that Tesla can’t just cancel a sale if a customer authorises a third party to place the order and pay for it on the consumer’s behalf.

Tesla says that it doesn’t care about the criticism. Liu Zhe, one of its local managers, told the media that protecting the integrity of its pricing model is more important than a negative reaction in the court of public opinion.

What happens next? One netizen joked that China should take a leaf out of Washington’s book and force Tesla to sell its China business to a domestic competitor. He even suggested a cheap and cheerful brand as a buyer: Wuling Hongguang, which is owned by SAIC-GM.

Pinduoduo says that it will maintain its focus on sales of value-for-money goods across a wide variety of categories, prioritising user engagement over winning new customers in a bid to turn a profit. Its Rm77.2 million ($11.7 million) loss in the second quarter was also much better than last year’s Rmb411.3 million deficit.

For Tesla this is a small hiccup on a remarkable journey that has seen it emerge as arguably the most admired foreign brand in China. That’s an impressive effort amid treacherous Sino-US geopolitics. Earlier this month it started a hiring campaign for a design team to create a “China-inspired” vehicle too, which it plans to manufacture at its Shanghai gigafactory.

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