NEW ENERGY: Tesla Gets China Charge In Wuhan, Slammed In Chongqing

By newsdoug on April 29, 2015

Bottom line: A negative tale from Chongqing spotlights the challenges Tesla faces in China due to lack of infrastructure, while a big taxi fleet order in Wuhan offers a possible new route for the company to jump-start its Chinese sales.

Sputtering new energy car maker Tesla (Nasdaq: TSLA) is in a couple of new China headlines, scoring a big order in the central city of Wuhan and an embarrassing bit of negative publicity in the southwest city of Chongqing. Watchers of the company and its difficult road into China might recall it was exactly a year ago that Tesla’s charismatic founder Elon Musk made a high profile visit to the country to hand over the keys for its first official sale to a local customer.

That event happened on the sidelines of China’s largest annual auto show, which rotates between Beijing and Shanghai and has become a major global event due to the country’s status as the world’s largest auto market. But in a testimony to the challenges Tesla has faced since that hype-filled day, Musk failed to appear at any public events during this year’s show that has been happening all week in Shanghai.

Instead, these 2 latest headlines are both coming from interior Chinese cities, which tend to be less wealthy than coastal cities like Beijing, Shanghai and Shenzhen and thus aren’t really Tesla’s main target markets. The publicity embarrassment in Chongqing shines a spotlight on the many difficulties that Tesla is facing not only in interior China but also throughout the country due to lack of charging infrastructure.

The Chongqing embarrassment is actually quite small, but has burst into headlines because it tells the tale of one of Tesla’s earliest Chinese buyers who later regretted his purchase. The Wuhan story is a bit larger and marks a major advance for Tesla, with word that one of the city’s taxi operators is adding 100 Tesla cars to its fleet as part of the city’s mandate to put more clean energy vehicles on the road.

Tesla’s drive into China has been bumpy, getting off to a rocky start after it ran into an early trademark dispute. It resolved that matter, and seemed to be flying high when Musk made his high-profile trip into China a year ago to launch the business. But then things shifted into low gear as sales sagged, dashing hopes that China might quickly become the company’s second largest market. Musk orchestrated an overhaul of the China operations starting late last year, including layoffs and the departure of the company’s former China head after less than a year on the job. (previous post)

No one has ever come out and said what led to Tesla’s problems, but reports have frequently cited a lack of infrastructure, most notably charging stations, as a major reason behind consumer reluctance to buy the cars. The big management overhaul also suggests the company lacked a good marketing plan aimed at making Tesla cars a must-have for newly wealthy car enthusiasts.

Both elements were most likely factors behind the embarrassing news from Chongqing, where local media spotlighted a Tesla owner who sold his car just six months after delivery for a third of what he paid for it. (Chinese article) The report details how advertising entrepreneur Fan Xiaobo was so excited to own a Tesla that he paid a premium 1.12 million yuan ($182,000) to be one of the country’s first owners, even though he had to wait 4 months before finally receiving the car last October.

But he quickly discovered that charging the car was a major headache. One of Tesla’s super-charging stations was available in the city, but that wasn’t extremely convenient. The ideal solution, he said, would have been to install a charger at his home. But the management company at his complex refused to allow him to do that — a widespread problem that is thwarting not only Fan but many Chinese electric car owners. (previous post) Frustrated by all the problems, Fan finally sold his Tesla for just 340,000 yuan.

Next let’s jump to Wuhan, where the news was more positive as the city added 100 Teslas to its taxi fleet. (Chinese article) The Teslas came as part of a bigger batch of 1,100 new electric vehicles that will enter the fleet, under a national Beijing directive aimed at getting more cities to use electric cars and buses in their public transport networks.

To put this latest sale in perspective, Tesla sold just 120 cars in all of China in January this year. That means this kind of big fleet purchasing could be a godsend to the company if other cities follow Wuhan’s lead. It’s possible we could see a few do that in an attempt to showcase the technology, with wealthier cities like Beijing and Shanghai the most likely candidates. Such fleet operators aren’t really Tesla’s target audience, but they’re certainly better equipped to handle the infrastructure issue and might provide the lift that Tesla needs to jump-start its anemic China sales.