Reports Of Over 2000 Tesla's Sitting Unsold In China

"Bozi Tatarevic" (hoonable) 03/17/2015 at 11:53 • Filed to: TESLA, EV, CHINA

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Tesla Motors officially expanded to the Chinese market last year in hopes of grabbing attention of the new wealth in China but sales have been sluggish and now there are reports that up to 2000 cars may be sitting unsold. In response to the lackluster sales start in China, Tesla is laying off a third of the workers there and some of them are coming out and sharing news about the rough start.

Tesla is laying off about 200 employees in China, mostly from their sales and marketing groups. According to !!!error: Indecipherable SUB-paragraph formatting!!! , one of the departed executives was quoted as saying:

"Musk is coming on too strong, and he will not compromise on the Chinese market. He's too impatient. Managers must meet his expectations and standards or leave. Tesla's management division in the Chinese market has had insufficient clarity and unity. ... The Chinese management's right to speak is almost zero."

According to !!!error: Indecipherable SUB-paragraph formatting!!! , there are over 2000 unsold Tesla vehicles sitting at port in Tianjin and on a dealer lot in Shanghai. During a recent conference call Musk said that the sales staff in China was not executing a good strategy because it was telling customers that there may be difficulties in charging the cars when there is none. The laid off employees argue that there are difficulties in charging among other issues and customers have been know to rig up chargers as !!!error: Indecipherable SUB-paragraph formatting!!! . To make the issue worse, about 74% of China's population lives in urban apartment dwellings which do not allow chargers to be installed in their parking garages due to a fire hazard law.

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Tesla is measuring its success by how well they increase demand for their vehicles and through 2014 they were averaging a little over 200 cars sold per month in China but according to !!!error: Indecipherable SUB-paragraph formatting!!! , they only sold about 120 cars in January 2015. The drop in sales may partly be due to the announcement of the new P85D which cause a flurry of cancellation for the Model S.

The base price for a Model is in China is about $103000. According to !!!error: Indecipherable SUB-paragraph formatting!!! news in China, Tesla insiders shared the pricing plan stating that in order to get a Model S built, the buyers were required to put down an initial deposit of about $2400 to start the order and then a second deposit of about $39000 when the car was ready to ship to China. Since the initial deposit was so small, many buyers cancelled their orders before placing the second deposit causing cars to be built and shipped with no buyers waiting on the other end. In order to combat this issue, Tesla increased the price of the first deposit to about $8000. This did not help the issue at hand but caused the sales to drop even further because buyers did not want to pay the higher initial deposit.

To further complicate issues, many gray market importers have popped and in some cities like Shenzen where they are selling more vehicles than the official import channel. They got in early and imported many of their vehicles before Tesla officially launched in China so they caught many of the early adopters who are not going to buy another similar vehicle. Another issue for Tesla is that their models have been excluded form many of the EV subsidies offered to Chinese car makers so prices are high and at that price level many of the Chinese elite prefer larger vehicles which end up being gas powered.

[Photo Credit: !!!error: Indecipherable SUB-paragraph formatting!!! ]

Bozi is the founder of !!!error: Indecipherable SUB-paragraph formatting!!! and creates articles on everything from engine swaps to late model car restorations. You can follow him on !!!error: Indecipherable SUB-paragraph formatting!!! and !!!error: Indecipherable SUB-paragraph formatting!!! or drop him a line at !!!error: Indecipherable SUB-paragraph formatting!!!

Luc - The Acadian Oppo > Bozi Tatarevic 03/17/2015 at 12:22

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Quite the interesting read! if this is not FP material I don't know what it. Good Job!

I'll take one of those 2000 cars at a heavily discounted price please.

Groagun > Bozi Tatarevic 03/17/2015 at 12:37

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I like the Model S, it's a great car, but Musk, I'm not so sure he's the hero and the 'next coming of Christ' that many would have you believe.

I respect and appreciate his approach and fresh look at the 'car'. I even support his campaign to sell direct to customers in the USA. Taking on the dealer network is a good thing and will shake that industry up as well: it needs it.

Where I start to have a problem with Mr. Musk is when I stop and look at the big picture and his entire portfolio. He is not a car guy!

The car business is like no other business on earth. It has subtleties and nuances like no other: it has rules and regulations like no other: it demands more of people than any other business or industry I have ever been in: the business as a whole moves very slowly but on the micro and individual car level it moves faster and turns on a dime faster than any other busienss. It's complicated at best.

I do not believe that Tesla Motors or Musk himself are in it for the long hall. Examine the business and plan as we know it and play it out over time: the numbers do not add up to long term success or sustainability.

Musk himself does not present a long term and stable image. He has SpaceX, SunCity and a few other very large projects, even the damn Hyper Loop 'thingamubob' and you see a man of vision with several fingers in several pies but not enough focus on the one that needs his attention the most or the one we care about the most here.

Clearly there were miscalculations made in regards to the Chinese market and Tesla is now paying for it's mistakes. I think Musk is making it worse and I'm not sure how they get out of this one.

Voice of C. Montgomery Burns > Groagun 03/17/2015 at 13:21

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Well said, Musk's personality also does not lend itself to the global car market (as it's clear with this article). He must not understand the differences between Chinese car consumerism and the American market but what's worse is his stubbornness to admit that he doesn't understand how to succeed in the Chinese market.