Why Tesla Motors Inc (TSLA) Is Struggling In China


Tesla Motors Inc (NASDAQ:TSLA) recently conceded that all was not well for it in China, one of the key market targets. The company has seen a Model S sales decline in China, but blamed the issue on misconceptions about charging the vehicle. However, analysts think that there could be more problems for Tesla in China than already disclosed.

This week, Tesla’s CEO, Elon Musk, broke the news that Model S sales in China during 4Q were weaker than expected. However, he remained optimistic that things would get better for the company in China. After Musk admitted the challenge in China, Tesla’s communication chief, Ricardo Reyes, explained that Chinese buyers were concerned about plugging in the car.

Charging misconception

Reyes said that Chinese buyers were worried about the challenges of charging their cars. It is said that most urbanized Chinese park their cars in shared garages because they live in apartments rather than homes. However, the operators of parking garages think of charging stations as a fire hazard. That has contributed to the misconception about the availablity of charging stations in China.

However, Tesla explained that it was working to resolve the issue. The company intends to expand its charging network in the country to make charging more convenient for Chinese drivers and less anxiety about the issue.

Model S losing buzz in China

Besides the charging anxiety, analysts have said that the buzz around Tesla Motors Inc (NASDAQ:TSLA)’s Model S is cooling. The car is no longer new, and as the case with any new product, easy sales are made in the early stages of introduction. Perhaps that means that Tesla now has to do more than it did earlier to get sales.

Not rich man’s car

The other issue is that some analysts feel Model S is not the type of a car that satisfies the ego of wealthy Chinese. Rich Chinese love big cars that are conspicuous enough and the 56.5-inch tall Model S is not in that grade. It is hard for the car to beat the 67.4-inch tall Porsche Cayenne SUV in the Chinese rich market. Therefore, Tesla Motors Inc (NASDAQ:TSLA) could have its best bet in China with Model X SUV, which is expected to enter China in 2016.

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Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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