Tesla Model S Registrations Plummet In China In February. Update: Improve In March

3 years ago by Eric Loveday 34

Tesla's Asia Sales Were A Noticeable Weak Spot For The Company In 2014 - The Trend Continues IN 2015

Tesla’s Asia Sales Were A Noticeable Weak Spot For The Company In 2014 – The Trend Continues IN 2015

Tesla Model S Design Studio In China - Company Owned & Operated

Tesla Model S Design Studio In China – Company Owned & Operated

Clueless in China?

Tesla’s struggles continue in China and we think we know the reason why.  Without a joint venture with a Chinese automaker, Tesla will likely see its struggles in China carry on indefinitely.  It’s how the automotive sector in China operates.  Honestly, we can’t think of a single other automaker that sells in China that doesn’t have a joint venture with a Chinese automaker.  For some reason, operating alone in China as an outsider simply doesn’t work.

Evidence of that is in Tesla’s stumbling Model S sales in China. Here’s how Bloomberg reports on the situation:

“Registrations of Tesla Motors Inc. Model S sedans in China fell 45 percent in February from the previous month, according to JL Warren Capital, in a sign that the carmaker’s sales in the world’s largest auto market remain weak.”

“The monthly total was 260, down from 469 in January, according to data released Thursday by JL Warren. The research firm also said Tesla imported 63 of the all-electric luxury cars to China in February after bringing in just 10 in January, down from hundreds monthly during last year’s fourth quarter.”

Down…down…and down.

Junheng Li, head of research at JL Warren Capital, stated:

“We consider units shipped one of the measures of monthly incremental demand strength in the Model S.  The data suggests sharp weakening in the demand.”

Even Elon Musk has shown frustration with Tesla sales in China, so it’s not as though this problem isn’t recognized by Tesla.  There’s been several executive shake-ups for Tesla in China and even attempts at rebooting sales there by offering freebies such as a Universal Mobile Connector.  It seems as though nothing is working right now, which is why we suggest that Tesla hunts down a joint venture partner.  It’s a necessary step, in our opinion.

Bloomberg reached out to Tesla for comment on the data from JL Warren.  The news outlet received no response from the automaker.

Lastly, there’s this issue with unregistered Tesla in China.  JL Warren claims that some 1,600 Teslas are sitting in China unregistered.  The research firm speculates:

“Maybe they were purchased by scalpers who are hoping to flip it. Demand isn’t as robust as Tesla had anticipated.”

Update:  According to Chinese news agency Xinhua, March sales reported 120-150% in March from February, which would indicate a sales level of about 600 odd units sold during the month.

Source: Bloomberg

Tags: , , ,

34 responses to "Tesla Model S Registrations Plummet In China In February. Update: Improve In March"

  1. Ash09 says:

    I think the main problem mentioned in an earlier insideev’s article pointed out that a lot of wealthier folks in China tend to not drive a car themselves, but rather get chauffeured around by a driver while they sit in the back.

    Maybe Tesla should offer a modified version where there’s a very luxurious back seat, more limo-like. Sales will probably jump then, because I doubt the guy driving the Model S is the owner of it in China.

    Not to mention China doesn’t have the open roads where they can take a road trip and enjoy the scenery easily either. Unless they want to visit those ghost cities I suppose. But can they also plug in? Range anxiety is probably a big issue there too, what with China being huge and all.

    There’s no doubt other issues at work here, but the demographic for cars is definitely much different in China than it is in the US.

    1. Wraithnot says:

      Tesla recently introduced optional “executive rear seats” that replaces the three rear bench seats with two larger seats and a center console. The smartphone app can also be used to control the climate and media settings with this option. I don’t know if cars with that option have started shipping to China or not. But they don’t offer a stretched wheelbase version so it might not be luxurious enough.

      1. John in AA says:

        I hadn’t realized that about the app. They really should introduce something like that for any S that has the subzero option, since otherwise the only way to control the rear seat butt-warmers is to ask someone in the front to do it.

  2. Big Solar says:

    No wonder with those sweet Tesla copies there.

  3. Speculawyer says:

    But why is a local Joint Venture required? What does that do to change things? Is it because Chinese consumers are strongly nationalistic?

    1. Lensman says:

      China is notorious for making it difficult for foreigners to sell imports. That’s an ongoing balance-of-trade issue between the USA and China. Also, there is a very persistent effort to strong-arm anyone who wants to build things there into sharing their intellectual property with Chinese companies.

      Remember, China is the country that has computer hackers working for its military conducting industrial espionage. China is also notorious for simply ignoring patents. For example, Chinese EV maker BYD tried to sell some EV buses to California, but the deal was killed when it was discovered that the buses were made using patents without permission.

      Bottom line: When it comes to business, China doesn’t play well with others.

      1. Wayne says:

        … as if the great US of A doesn’t employ computer hackers to spy on everyone else in the world.

    2. Mikael says:

      A joint venture is required for foreign car manufacturers to be allowed to produce cars in China.
      It’s mainly done to avoid high import tarifs.

      But there are a lot of imported BMWs, Mercedes, Audi etc. selling in China and the Tesla is way below them in price.
      So the only real advantage of a joint venturs, cuting cost, isn’t really all that relevant.

      Not relevant for the Model S and Model X at least. A joint venture will most likely be needed when the Model 3 arrives in China.

      1. Speculawyer says:

        Hmm . . . by what you say then they should be doing OK.

        I think that one of Tesla China’s problems is that (1) the Chinese simply have a dim view of EVs and (2) it may be difficult for a lot of people living in big apartment buildings to get a charging system installed.

        The chinese have long had electric bikes and low level (NEV-like) electric vehicles. But the people making money now want ‘real cars’ . . . which means gas cars. And the people with a lot of money want status symbol badges like BMW, Mercedes, and Audi. Tesla needs to get more coverage about their amazing 0 to 60 times, their supercharger network, the big screen UI, etc.

        Of course (2) will be hard for Tesla to solve . . . gonna need government regulations forcing the building of charging infrastructure.

        1. Mikael says:

          I think one big problem is that the car isn’t up to scratch. Not high enough quality, luxury and most importantly no roomy executive rear seat.
          A conclusion most Tesla fanboys would have you burned for. 😛
          Maybe the Model X with the third row removed and the second row moved back a bit will be more successful.

          I do agree with your number 2 though, charging infrastructure in apartment buildings. I would have thought that the superchargers would ease that situation a bit and increase the sales fairly rapidly. But it doesn’t seem to be enough.
          A lot is being done (or at least planned and proposed) about the charging in China, but it doesn’t seem to be nearly enough yet.

        2. Lensman says:

          Certainly part of Tesla’s problem with selling the Model S in China is the lack of EV chargers; the lack of public chargers, and the difficulty of getting a charger installed in a parking lot near one of their ubiquitous large apartment buildings, which don’t have reserved parking even when there is a parking lot for that building.

          But I’ve never seen any article which delves deeply, or in a convincing manner, into exactly why sales of Tesla Model S’s have lagged, even as EV sales in general surged in China last year. Don’t buyers of those other EVs have to same problem with plugging in that potential Model S buyers do?

          Perhaps there isn’t any one single reason, but a combination of factors. Or perhaps, as one person suggested, it’s that the surge in EV sales is coming from government purchases, so finding a place to charge on private property isn’t an issue for the buyers.

    3. Leptoquark says:

      Not being part of a joint venture isn’t really the problem, it’s more that the way EV’s are used in China will be necessarily different than in the West. We’ve all seen the photo of the Model S charging off the power line utility pole. EV’s are great when you have a reliable place to charge it at home in your garage. When you don’t have a garage, it’s not so great.

      I’m continuously hearing from folks here in the US who live in apartments, townhomes or condos who have to jump through huge hurdles to get charging, and most are unsuccessful. Now, imagine you’re living in a fifty story high-rise in China, and to get a charger put into the garage where you just bought your $30,000 parking space, now you have to find out who in the provincial power authority you have to see to get wiring put in for a Tesla wall mounted charger. Unless the joint venture partner can be the “fixer” for successfully integrating a Model S into a customers life, Model S sales will continue to disappoint.

      Life is great when you have your own garage and can charge at home.

    4. sven says:

      The US should file a complaint with the World Trade Organization on behalf of Tesla.

  4. Priusmaniac says:

    A joint venture is not an obligation. The Chinese market demand time and studborn persistence. You must keep knocking on the same nail until it enters. Demand will come on its time. It must not be forgotten that for a Chinese a 10000$ car is an expensive car like for us a 60000$ one. An 100000$ car is like a 600000$ car for us. Sure you can sell some but only after showing them around for quiet a long time and letting people become used to see them in the show room or on the street. Perhaps also the Model 3 will be more appropriate to China where it will be considered simply very expensive instead of extremely expensive. On the other side Rolls Royce (with no joint venture) is selling a lot so things are not that simple. Persistence in the place will likely pay out in the long term.

    1. Mikael says:

      There are more millionairs in China than in the US and the number of luxury cars sold are about the same in the two countries.

      So whatever number they could sell in the US they should be able to do that in China too.

      1. Mr. M says:

        So how many millionares is US bought the Tesla Model S???

        When i read comments it’s more like a lot of whealty people (Inc around 50k-150k$/a) are purcharsing the S. Thats a lot of people that are no millionares.

        All those whealty people might not exist in china. Maybe china is more divided in poor and rich?

        1. Mikael says:

          Well, the middle class in China is in a larger number than the whole US population.

          The upper middle class is still a bit lacking though, there is a jump to the upper class.

          But there were 1,5 million imported cars into china last year (imported = 3x the normal price markup and basically just luxury models)

          BMW and Audi sold half a million each, about one third of those imported.

          Mercedes Benz sold 280k, half imported. And Porsche about 50k and all imported.

          Tesla… imported 5k and sold about half of those.

          So the potential buyers are there, rich, semi-rich, middle class wannabies. And a lot of buyers who buy expensive cars, locally made (by joint venture BMW/Audi/Mercedes) or imported.

          Not to mention that the status of buying a foreign imported car is extremely high. So high that car buyers often are willing to pay triple the price compared to the price in Europe or the US for the exact same model.

          So in this case Elon needs to get his head out of his ass, give the chinese a car that they want and also stop insulting his potential customers.

          The american middle class and the average norweigan might accept that “disrespect”, but the chinese upper class won’t.

          1. JakeY says:

            I think you are reading a bit much into things. While Tesla certainly can do some China focused improvements (LWB version would be the big one), the biggest problem is that not necessarily the level of luxury in the interior, but rather the branding.

            While in the US, Tesla is somewhat known, in China it’s a new brand. And it’s American too (less prestige than European brands). My impression from visits in China is that brands matter a lot in terms of status symbols (which is why there are so many knock-offs sold). If you say you bought a Tesla in China, you’ll most likely be met with silence, but if you say you bought a BMW/Mercedes/Audi everyone knows what you are talking about.

  5. JakeY says:

    Can’t really tell with the given numbers. It once again shows month to month variance is a worthless indicator even though analysts continue to use it without context. If you look at China auto sales, February is the weakest month (coincides with the largest Lunar New Year holiday where most all business close and everyone is back at their hometown), so a large part of this is due to season variance.

    http://s1.ibtimes.com/sites/www.ibtimes.com/files/styles/v2_article_large/public/2014/01/06/us-china-auto-sales.jpg?itok=AAXPetK6

    1. JakeY says:

      Another data point. Feb 2015 auto sales in China (1.4 million) were down 30% from sales in Jan 2015 (2 million). All that was based on the Lunar holiday. That’s why month vs month variance isn’t even calculated even in the below article (even though the data is there), as it’s not a useful metric.
      http://www.usnews.com/news/business/articles/2015/03/10/chinas-auto-sales-growth-decelerates-in-february

    2. Lensman says:

      Indeed. Tesla is on a quarterly rotation, maximizing shipments to (as I recall) China the first month in a quarter, Europe (and Right-hand drive countries such as Australia) the second month, and North America the third month of every quarter.

      Therefore, the month-to-month variance between sales in China is a pointless comparison. The EV staff who write their monthly Sales Report Scorecard know this; it seems odd that whoever wrote this article does not.

      Now, it may very well be that Tesla won’t be able to get much sales volume in China because it refuses to “play ball” with how things work in China. What in Western countries are considered corrupt governmental and business practices are considered the norm in China.

      But it’s simply wrong to say that a month-to-month drop (or rise) in sales is due to the lack of any joint manufacturing venture between Tesla and Chinese companies.

  6. Peter Markowski says:

    iPhone sells like hell.
    I think Apple and its iPhone is an obvious example that refutes Bloomberg’s assumption. Apple operates independent of any joint venture and is successful. Rumours of future battery technology could have the same effect…

    1. Speculawyer says:

      But the iPhones ARE built in China.

      1. Lensman says:

        iPhones are -assembled- in China, mostly from parts (including batteries) made elsewhere in Southeast Asian countries. Apple doesn’t give Chinese companies the opportunity to do what they’re notorious for: providing shoddy or even counterfeit computer chips and parts.

        You can be sure Apple keeps a very close eye on its operations in China, and you can be sure it does a lot of spot-checking once units arrive in the USA and other first-world countries, to ensure no Chinese counterfeits goods are substituted.

        http://www.businessinsider.com/counterfeit-parts-from-china-raise-grave-concerns-for-both-us-companies-and-national-security-2012-6

        1. Speculawyer says:

          Sure . . . but having the iPhones built in China reduces any nationalistic impulses to not buy the product. In fact that Apple may have the perfect model for selling products in China . . . design them great and not allow crappy products but build them in China such that the people are building domestically built products.

          Kinda like the way some Germany & Japanese makers do with their automobiles here in the USA. :-/

    2. JR says:

      Well Apple didn’t do well in the beginning, with the Iphone 5C, things takes time

  7. Bill Howland says:

    Eric still doesn’t get it. UMC’s have been standard with most “S”‘s from the start. Thereby, it isn’t a freebee.

    1. Mike I says:

      Once again, you’re spouting information that does not apply to Tesla sales overseas. Some of the overseas markets like the UK, Japan and Hong Kong were about to start deliveries when the Model S Mobile Connector adapter melting issue came to light. No new market has had the Mobile Connector available in-country since that time. While you can buy a Mobile Connector in the UK today, there is no native adapter for the UK domestic socket, BS1363. It is intended for use in the UK with IEC sockets (Red and Blue Commando) only.

    2. Mike I says:

      The “Universal Mobile Connector” reference in the story is a new development. AFAIK, Tesla provided a Wall Connector (not to be confused with the High Power Wall Connector because the one for Asia only goes up to 40A) with the cars. Just recently they started including a Mobile Connector with China-appropriate adapters. So, that would be a “freebie” if it was a newly included accessory without a price increase on the car.

  8. Dan says:

    Factoring in the 2 week New Year closure leading to a industry wide 30% drop in sales, Tesla sales for February aren’t that different from January. Tesla looks to be on pace to sell 5000 in 2015 which isn’t that bad.

  9. Malcolm Scott says:

    I’d be interested in hearing from someone knowledgeable on China/US geopolitics commenting on overall Tesla sales in China. Others here indicate that the imported European, luxury cars are selling well, perhaps a traditional status symbol that generally does not apply to a US car. US gov’t assertive military and political containment policies of China’s role in the world can’t possibly help fully imported Tesla sales. This can’t be ignored.

  10. Whatever says:

    Hong-Kong members of a large Tesla forum complained a lot when the Dual Motor version was introduced. They had ordered or recently bought the single motor version and were furious not to have got the latest and greatest (the Dual Motor version will not arrive until this summer in Hong-Kong, and the Model S started selling there much later than in the U.S). It was like an insult to their personal image. They wanted to cancel their orders, or get their just bought car replaced with the D model, and Elon Musk to officially apologize. The discussion revealed that they bought the car as a status symbol. They wanted to be able to brag that they had the most advanced car in the World. It was not possible anymore since a more recent more capable model was introduced. They are newly rich people, and behave like spoiled brats, and do not buy an electric car out of concern for the environment. So if Tesla want to cater for the special needs of the Chinese, they should introduce the Model X in Hong-Kong on the same day as in the U.S, or even better : before! Especially since it was also revealed that Hong-Kong sets the trend for China.

  11. Nelson says:

    Who cares! Only investors.
    Let them eat BYD Qin.

    NPNS! SBF!
    Volt#671

  12. Londo Bell says:

    If Elon keeps believing that Tesla sales problem in China is due solely to the charging infrastructure, he’s dead wrong.

    Many months of data / evidence showing that Tesla is selling poorly in China, and is going to miss big time in its sales forecast.

    Mind you, a lot of what Tesla is riding on right now is based on the assumption of sales success in China.

    As I’ve said before – so I ain’t going to repeat again – buying a luxury vehicle is not JUST about the excitement of driving it; in fact, that’s the least part, to the point of almost 0 relevancy.

    It’s political, cultural, showmanship (don’t expect someone to walk in to a car dealership and buy a luxury vehicle as the norm; it’s more like, car salespeople going to companies to sell the vehicles), services, and most importantly, connection (with local and central Chinese government). This sales model is utterly different from almost all other countries in the world where vehicles sales are huge!