The second price cut this year brings down the cost of its least expensive variant to US$42,900, according to the company
SHANGHAI: Tesla Inc. faces criticisms from Chinese customers complaining that they ended up paying thousands of dollars more for their new cars because they bought before the company’s recently enacted price cuts.
The backlash comes as the electric-vehicle maker is betting heavily on the country by building a factory in Shanghai. Tesla aims to start mass production of the Model 3 sedan next year, and ultimately wants to make 500,000 cars a year here to capitalize on China’s booming market for electric vehicles.
A Tesla spokeswoman declined to comment. Tesla on Friday said anyone who bought a Tesla car before the price cut would get a 50% discount on the company’s autopilot or full self-driving options.
Some Tesla owners in China this week took to social media to attack the auto maker’s Feb. 28 pledge to lower global prices and its decision to shut most of its physical stores.
One video that went viral showed disgruntled Tesla owners unfurling a banner across the front of a local Tesla store. “Tesla’s prices are dropping unreasonably,” it said in Mandarin. “This is a violation of consumers’ legal rights.”
Liao Zongyi was one of 10 Tesla owners who converged on a store in the central city of Changsha on Saturday to register their annoyance. Mr. Liao, who runs a catering business, took delivery of a Model X on Feb. 25 that he could now buy for roughly $30,000 less, he said on Wednesday.
“I feel like I wasted my money,” the 34-year-old said. He assumed Tesla would refund him the difference, but “it turned out they were just going to leave us in the lurch and not even respond to our messages.”
Ethen Hou, a 32-year-old customer from Chengdu in western China, said Wednesday he paid about $141,650 for a Model X sport-utility vehicle that was delivered to him Feb. 23. The car now costs only $114,800, Mr. Hou said, or 19% less. He expressed disappointment that nobody from Tesla had called him to apologize or offer compensation.
The extra $26,850 “is just my contribution to Elon Musk’s rocket-building project,” Mr. Hou said, referring to the Tesla chief executive’s company SpaceX.
Tesla has significant brand cachet in China, where Mr. Musk is admired as a corporate visionary. Dozens of Chinese EV startups have sprouted up over the past few years, many of them invoking Tesla as their inspiration. Tesla sold 16,360 cars in China last year, according to auto-intelligence firm LMC Automotive, making it the company’s second-biggest market after the U.S.
Complaints about price cuts have become a global issue for Tesla, but it’s a new situation for the company in China, where customers pay far more than their U.S. counterparts.
Tesla hiked its Chinese prices in July after Beijing raised its tariff on U.S. vehicles to 40% from 15% amid the trade dispute with Washington; then it reversed course and implemented a string of price reductions to arrest a drop in sales.
Before the reductions began in November, a basic Model S sedan cost the equivalent of $126,800 in China, whereas now it is available for $109,000, according to the Tesla website. It isn’t clear if that price reflects the latest cut.
Closing stores would enable Tesla to start offering the Model 3 at its intended price of $35,000, the company said last week. In China, the Model 3 currently starts at around $60,700.
In a difficult week for Tesla, Model 3 sales in China were suspended Tuesday after Shanghai customs refused to clear 1,600 vehicles over faulty labeling. In a statement Wednesday, Tesla said it had “already reached a resolution with Chinese customs, and we are working closely with them to resume clearance procedures on these vehicles. Sales of Model 3 in the country are not impacted.”
In a sign of the scale of Tesla’s gamble in its Chinese factory investment, one of the company’s emerging rivals, NIO , said in a filing Tuesday that it had abandoned plans to build its own plant in Shanghai. The Chinese EV startup, which listed shares in New York in September, said it would instead continue to contract all its manufacturing to JAC Motor, a local state-run auto maker. NIO said it sold 11,348 cars, and lost $1.45 billion last year.
Auto analysts say EV startups like Tesla and NIO could potentially save billions of dollars by emulating the smartphone industry’s outsourcing model, hiring auto makers with existing factories to build cars on their behalf. But they also say that outsourcing risks sacrificing quality, with manufacturers like JAC known for producing low-end cars, not premium EVs. - WSJ
To gain full access to The Wall Street Journal online, subscribe to StarBiz Premium Plus.
Win a prize this Mother's Day by subscribing to our annual plan now! T&C applies.
