Musk reboots Tesla in China as ‘range anxiety’ crimps sales
SHANGHAI — After rushing to get a Tesla Motors Inc. Model S, Shanghai resident Sunny Zhang is suffering from buyer’s remorse.
Zhang ordered the car last April and received it in September. Echoing complaints from other Chinese Tesla owners, he says he waited too long for the vehicle to arrive and that aftersales service has been spotty. He’s also so afraid of running out of electricity he rarely ventures far from his home, a condition commonly known as range anxiety.
“If I had to do it all over again, I wouldn’t have bought it,” said Zhang, who sits on the board of Tsingshan Steel and also owns a BMW X5 and Ferrari. “The infrastructure still isn’t suitable to own an electric car.”
A year ago, chief executive Elon Musk was greeted by rapturous crowds in Beijing and Shanghai as he handed over the keys to Tesla sedans. Now he’s back in China, and this time he’s on the defensive, trying to explain why sales have softened after starting so briskly. In an interview with state media, Musk, 43, made a startling admission: there’s a backlog of unsold Teslas around the country because people he dubbed speculators ordered cars and never bought them.
As Musk huddles with his China team, Tesla is rushing to expand its network of charging stations to assuage range anxiety, add luxury features that suit local tastes and retrain a sales force Musk previously described as “brain-dead.”
The Chinese market initially looked more promising for Tesla. Wealthy consumers have a growing appetite for luxury automobiles. And electric cars are seen as a possible antidote to air pollution in China’s cities. In November Tesla said its store in Shenzhen, across the border from Hong Kong, was one of the company’s highest grossing locations worldwide.
Two months later, Musk told an audience at the Detroit Auto Show that fourth-quarter China sales were “unexpectedly weak” due to incorrect perceptions about ease of charging. He blamed the ineptitude of the Chinese sales force.
During an earnings call with analysts the following month, he went even further: “This sounds kind of brain- dead, but our sales team was telling people that it was difficult to charge in China, even though this is not true.”
On Friday, Musk said that China sales have grown steadily in the last three months. But researcher JL Warren Capital says 260 Model S sedans were registered in China last month, down from 469 in January. The shares fell 17 per cent this year through Friday and were up 3.01 per cent to close at $190.57 in New York Monday
Like many Western companies, Tesla misread aspects of the Chinese market. The company failed to realize that many wealthy denizens of Beijing, Shanghai and Shenzhen prefer to be chauffeured around. People who spend a lot of time in the back seat expect creature comforts, not the bench-like configuration found in a standard Model S.
Based on customer feedback, Tesla introduced “executive rear seats” as a $2,000 option. Leather-wrapped, they include two zone heaters; passengers also can use a smartphone to control media, climate and panoramic roof settings.
“We know Chinese customers like to be driven so they want something a little plusher,” said Dan Hsu, who runs Tesla’s China training program and manages a Shanghai store and one other. “That’s one of the benefits of our direct-sales method. We can react much faster to these types of requests.”
Chen Zhong, co-founder and chief marketing officer of mobile media firm 21WeMedia, got a Model S in July. The Beijing resident said Tesla could do an even better job localizing the car to suit Chinese tastes. Chen said popular apps such as QQ music and Xiami aren’t loaded into the car’s operating system and that the navigation map is unpopular and not the widely used ones from companies like Baidu or Gaode.