Our friends from Economics 244 (The Economics of the Auto Industry), taught last Spring Term, will remember the splash Tesla Motors had just begun to make when the first Tesla Model S reached China in April 2014. Almost a year later, Tesla continues to struggle for footing in the Chinese electric automotive market, where sales account for 30% of its global target. Tesla has exported 3,500 cars to China thus far, 30% less than the 5,000 vehicle sales target [the prof: 30% x 30% = 9% short].
One challenge is the lack of necessary infrastructure. While Tesla has already installed 52 free charging stations and 800 other charging stations in over 70 cities, perception about the ubiquity of charging stations among the target segment has dampened sales. Elon Musk blamed “unexpectedly weak” sales on a “‘misperception about charging,’ saying owners worried about not being able to charge up at home” (New York Times). Worries about charging at home may be valid however. As Tesla’s target segment in China consists primarily of wealthy urbanites living in apartments, installation of charging stations in their apartment presents issues. Potential consumers have cited that difficulty as a deterrent to buying electric cars. Charging takes up to three hours, a long period of time to wait around a public place for a car to recharge.
While we can expect expansion in the electric car market over the next five years, domestic producers have an advantage over foreign producers such as Tesla. The Chinese government, to encourage China’s growing number of certified drivers to go green, has begun subsidizing all purchases of domestic electric vehicles. Although the Chinese government does not subsidize Tesla purchases, the reality is that Tesla consumers in China are typically wealthy enough that they do not need a subsidy. Further, Tesla owners have already established communication networks to charge at each others’ charging stations until charging stations installed in homes become more commonplace.
Source: NYTimes, Feb 11