Tesla In China: Promised Land, Huge Risks...Or Both?

By Antony Ingram

18 1,644 views Jul 30, 2013

Follow Antony

2013 Tesla Model S

Enlarge Photo

Despite its pollution problems, China has never shown much interest in the electric car and sales have been a mere fraction of a fraction of the country's huge new car market.

Not that Tesla Motors [NSDQ:TSLA] CEO Elon Musk is put off by unfavorable odds, as he pushes towards Tesla sales in China.

Some, says the Silicon Valley Business Journal, are calling the move a "huge risk", and to an extent, they're right.

Selling an electric car in China--any electric car, no matter how competent--seems like a tall order. Just 3,000 electric vehicles were sold there in the first three quarters of 2012, barely greater than the monthly sales of cars like the Nissan Leaf or Chevrolet Volt in the U.S.

It's familiar electric car issues holding the cars back, with huge import taxes and range anxiety among the biggest problems for Chinese car buyers. Regular gasoline and diesel automobiles are becoming cleaner and more efficient too, making the benefits of electric cars less clear.

Some may also be concerned that China's power grid is among the dirtiest around the world--not ideal for charging electric cars from.

Tesla remains undeterred, though. While more details are expected after the company's August 7 earnings report, Tesla is said to be opening its first Chinese showroom in Beijing later this year--three times larger than any U.S. showroom.

The company's move into China may have come with impeccable timing too, for a country taking all the luxury products brands can offer. BMW, Audi, Mercedes-Benz, Porsche and other luxury automakers are all enjoying strong sales in the country, and Tesla could well ride that wave when the Model S debuts in China. That Tesla is an exotic, foreign product is another bonus.

Precedence has already been set in Hong Kong, where the company claims hundreds of orders have already been taken.

The Chinese government itself is also supportive of electric cars right now, even if the Chinese people aren't so keen. The government has invested heavily in electric car-producing automakers like BYD.

So Tesla in China--a huge risk, or a shrewd move? It could be both, but some skeptics have one final concern about the company's move to one of the world's biggest car markets.

"I'm far more concerned that the Chinese will take a Model S, tear it apart and knock it off," said Theodore O'Neill of Litchfield Hills Research to the San Jose Mercury News.

Tesla could be a success then, but it's sure to have plenty of budget imitators, too...

_______________________________________________________

Follow GreenCarReports on Facebook, Twitter, Instagram and Google+