SHANGHAI, Feb 13 (Reuters) – Lower prices have given Tesla ( TSLA.O ) sales a big hit in China, but analysts, and even fans, warn that the northern carmaker -American needs to step up his game in the long run to avoid suffocating in the dust of the rapid. -Moving rivals in the world’s largest electric vehicle market.
Immediately, Tesla’s January price cuts sent deliveries of its China-made vehicles up 18% from December. Tesla’s thick profit margins have put it in a position to wage a price war on competitors in China and beyond, analysts say.
But they say Tesla has lagged behind competitors in China in introducing new models, improving navigation systems and adding luxury interior touches or white-glove customer service to cater to the range of consumer preferences under development for electric vehicles.
“Tesla is facing a serious problem of a very limited product mix,” said Cui Dongshu, secretary general of the China Passenger Car Association (CPCA). “Its slowness to respond to Chinese consumer preferences has led to a very passive positioning for Tesla to rely on few means such as price cuts to remain competitive.”
Latest updates
See 2 more stories
Even Tesla CEO Elon Musk himself has admitted that China is where his company could face its toughest competition.
Tesla did not respond to Reuters’ request for comment on its China business. Grace Tao, Tesla’s vice president of external communications in China, previously said the price cuts in China reflected engineering innovation and responded to Beijing’s call to encourage economic development and consumption.
The China Association of Automobile Manufacturers expects sales of electric vehicles and plug-in hybrids to rise 35% by 2023 to 9 million vehicles, nearly a third of total new vehicle sales in China.
While Tesla has increased sales in China, its second largest market, it has also lost share. From 15 percent in 2020, its share of China’s electric vehicle market fell by a third to just 10 percent in 2022, according to CPCA data.
Tesla offers two models in China, the Model 3 sedan and the Model Y crossover. This keep-it-simple approach has driven scale and lowered costs.
After the latest price cuts, the Model 3 starts at about $34,000 and the Model Y at $38,000. But Chinese car buyers, returning to showrooms this year after China’s severe COVID-19 curbs ended, are being wooed by competitors offering a wide range of alternatives.
BYD ( 002594.SZ ), which overtook Tesla for global sales volume last year and has a market value of more than $100 billion, offers more than 60 different versions of plug-in hybrid cars and EVs. Much smaller but ambitious Nio ( 9866.HK ) has grown from two models to six over the same period and plans to launch five more this year.
“The aging product line is a real problem for Tesla,” said Yale Zhang, CEO of Shanghai-based consultancy Automotive Foresight. “Once BYD and other electric vehicle startups follow the lower prices, the effect of Tesla’s price cuts could disappear in the blink of an eye.”
I DO NOT TURN IN UA TIANANMEN
Tesla’s self-driving software and navigation systems, touted by CEO Musk as competitive strengths, have also come under fire from customers for slow updates and crashes on Chinese roads. Buyers of luxury electric vehicles that hire drivers are less interested in paying more for software.
Chang Yan, a 34-year-old Chinese car blogger who was among the Model 3 buyers in China in 2018, said his car still asks him to make U-turns on Chang’an Avenue , strictly guarded, near Tiananmen Square, where these movements take place. forbidden
“This is a stark contrast to Nio, (EV brands) Xpeng and Li Auto, whose navigation aids have worked almost perfectly,” said Chang, who also drives a Nio sedan.
Tesla has been considering a shift in its marketing in China, focusing more on energy efficiency, practical features and less on cutting-edge functionality, a person with knowledge of the matter said.
It has also been studying how its Chinese rivals, led by BYD, get customers into showrooms, especially in smaller cities, said the person, who declined to be identified for lack of authorization to talk to the media
Takeaway: BYD ensures that the bottles of drinking water offered to showroom visitors are warm in winter in a nod to local preferences.
Tesla, which earlier this year promoted its China chief Tom Zhu to lead global sales and production, is also giving its China sales team a more direct line to development engineers at products to provide local feedback, the person familiar with the matter said.
LESS IS MORE?
Undoubtedly, Tesla’s design aesthetic, with sparse interiors and faux leather, still appeals to many.
Cui Yang, a 31-year-old doctor who bought a Tesla in Beijing after the recent price cut, said he was won over by the “minimalist interior style and technological feel”.
On the other hand, Chinese brands like Nio and Zeekr tout their buttery-soft Napa leather and traditional luxury features like seats with massaging functions aimed at both the passenger and driver experience.
Some EV manufacturers see this premium segment of the market growing rapidly in the coming years.
Li Auto ( 2015.HK ) targets electric vehicle buyers looking for cars that can transport families, which they expect to pay above Tesla’s current price, starting at around $44,000, a sales category expected which represents 10 million vehicles in sales throughout the market in 2025. .
Then there’s a “buy local” challenge for Tesla.
Chinese consumers like Lin Wenwei, 50, who want to support a Chinese brand even though Tesla makes the electric vehicles it sells in China.
“I’ve always been more inclined to buy a domestic brand of electric vehicles for the domestic industry,” Lin said as he tested a Seal sedan for his son at a BYD dealership in suburban Shanghai, after getting a BYD Dolphin hatchback.
($1 = 6.7973 Chinese Yuan Renminbi)
Reporting by Zhang Yan and Brenda Goh; Editing by Kenneth Maxwell
Our standards: the Thomson Reuters Trust Principles.
