Elon Musk flashes Tesla China's strategy has been renewed on fierce competition

Elon Musk flashes Tesla China’s strategy has been renewed on fierce competition

Tesla is shifting its marketing approach in China where fierce competition from local rivals and uneven demand put its growth plans at risk.

Tesla Inc. It has changed its marketing approach in China, where fierce competition from local rivals and uneven demand jeopardizes its growth plans in the world’s largest electric vehicle market.

The leading EV company has extended insurance subsidies by up to 8,000 yuan ($1,100) for new buyers, according to a post on its Weibo account, has reinstated a user referral program and even advertised on a local TV shopping channel — a rare move for a company that prides itself on eschewing advertising methods. traditional.

The moves come after Tesla slashed prices across its Chinese lineup for the first time in 15 months in October, as it faces a slew of headwinds there, from ongoing Covid restrictions to more aggressive domestic competitors. And the prospect of more difficult conditions in China is adding pressure to the automaker’s shares, which fell to a two-year low on Monday and lost nearly half their value in less than two months.

Tesla recently upgraded its Shanghai plant to double its capacity to about 1 million vehicles annually. However, in a sign that the company is struggling to boost sales to meet those ambitions, parking times in China have shrunk to less than one week from 22 weeks earlier this year.

Failure to turn in additional production could jeopardize CEO Elon Musk’s goal of 50% annual global sales growth for years to come.

Wang Hanyang, an auto analyst at 86Research Ltd., said: Headquartered in Shanghai: “We can tell from the short notice that Tesla’s purchase order in China is insufficient. The company faces significant competition from local competitors as well as the less confident consumer. Promotions, including insurance subsidies, may extend into next year.”

Musk noted last month that demand was “a little bit tougher” due to a slowdown in the real estate market in China and an energy crisis in Europe, after the automaker reported lower-than-expected third-quarter revenue. Tesla shipped 71,704 cars from its Shanghai plant last month, down from a record 83,135 in September.

China is home to the most competitive electric vehicle market, with domestic automakers such as BYD — which sold a record 217,816 vehicles last month — and expanding startups including Nio Inc. and Xpeng Inc. Domestic car companies accounted for nearly 80% of electric vehicle sales during the first seven months of the year, according to the China Passenger Car Association.

Local electric car makers have also been adept at attracting Chinese buyers, offering features like built-in karaoke systems and perfume dispensers, as well as lavish customer service. Companies such as BYD and SAIC-GM-Wuling Automobile Co. Also a range of low-cost vehicles for budget-conscious drivers.

Tesla isn’t the only luxury electric vehicle maker slashing prices in China. Mercedes-Benz Group AG last week cut the cost of two electric vehicle models by up to $33,000 amid slumping sales.

With a starting price of 265,900 yuan for the Model 3 sedan and 288,900 yuan for the Model Y SUV, Teslas have been attracting wealthier buyers in China’s largest cities. The company is now looking to attract drivers in smaller cities where EV penetration is not as high.

In a recent marketing campaign that was a first for the automaker, it asked potential customers to nominate cities for the automaker to take the cars for potential buyers for a test drive, and offered some respondents to use the Model 3 for a week. Previously, it required customers to travel to their nearest showroom for a test drive.

Tesla also reintroduced its user referral program last month — an offer that was canceled in the US last year. Owners who refer family and friends to buy a Tesla in China are rewarded with small gifts like wireless headphones or baby strollers, along with the chance to win a visit to the Shanghai factory or free use of a Tesla for a year. Last month, the company closed its main showroom at Parkview Green Shopping Center in Beijing.

Cui Dongshu, general secretary of the China Passenger Car Association, said at a press conference earlier this month that China’s continued reliance on lockdowns and other Covid restrictions is affecting car sales, and this has led to pressure on Tesla to “take immediate action to boost sales.” “.

Previously criticized by local media for being “arrogant” toward Chinese customers, Tesla recently polled owners in the country, asking questions about their favorite promotions and what services they can expect while waiting to pick up their car.

“We expect more demand-boosting promotions and cap deliveries before the end of the year,” said Junheng Li, CEO of equity research firm JL Warren Capital LLC.

Otherwise, Tesla’s monthly new orders in China could only be 20-30,000 units after it became normal in December, while Shanghai’s monthly production is now 80-85,000 units, she said.

The main story for Tesla in 2023, Lee said, will be “excess energy.”

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