Tesla Motors, the California-based maker of cutting-edge electric cars, announced disappointing sales for its most recent quarter. The company cited multiple reasons for the sluggish performance, including weather, delivery problems and capacity issues. Its dismal sales numbers in China stood out.
Tesla and China may seem like a logical match. China is a massive and growing auto market with a terrible pollution problem, and its cities have lots of wealthy car buyers who covet foreign luxury brands. Elon Musk, Tesla's CEO, created a huge amount of buzz for the company during a trip to China in spring 2014, sparking the interest of Chinese buyers and US investors alike. The company hoped to sell 5,000 cars in China that year.
But Tesla's big plans have run into myriad problems relating to management, manufacturing, positioning and strategy. It missed its 2014 sales target, and its first-quarter sales in 2015 do not look any better. According to interviews with dealerships by JL Warren Capital, Tesla imported just 63 of its cars to China in February and 10 in January, down from the hundreds that it brought in monthly in the fourth quarter of 2014.
Pinpointing the problems
There are several explanations for the company's weak performance in China. The first two people Tesla picked to lead its efforts there - Kingston Chang and then Veronica Wu -- came from high-powered positions in the traditional corporate world, but neither of them had any startup experience. It is important to keep in mind that Tesla is still in the startup phase, having not established a profitable business model.
Tesla's positioning in China is different from its strategy in the US Its main target in China has always been the uber-rich. In the US, the addressable market for high-end electric vehicles includes the middle class, and is therefore much bigger. China's "green" movement is still nascent compared with that in the US, and most Chinese customers view a Tesla car as a status symbol rather than a commitment to preserving the environment.