Tesla Reloads Chinese Sales Strategy After a Monumental Misstep
It’s hard to argue that Tesla hasn’t taken the United States by storm. The electric car company has not only convinced thousands of people to drop their gas-powered cars, but it’s also gained enough influence that states are changing their laws to make selling the Model S easier. With an SUV coming soon, and a smaller sedan, the Model 3, coming after that, Teslas are poised to become a lot more commonplace than they already are. In the same way that driving a Prius was cool in the early 2000s, it’s now cool to drive a Tesla.
On the other hand, in China, Tesla has been a lot less successful. The rapidly growing economy offers a lot of potential for sales, but while several other car companies have enjoyed a lot of success there, Tesla is struggling. It would seem like Tesla would be a perfect fit for China though. Crowded cities and industrial growth have led to suffering air quality, and moving toward more electric cars on the roads could help with that problem. You would think a unique, innovative car that happens to be electric would be a great fit for the growing number of luxury car buyers in China, but at least for now, that’s not the case.
For Tesla, the easiest problems to fix are with the car itself. While Americans often drive themselves, Chinese car owners prefer to be driven. While the Model S can easily accommodate rear passengers, it wasn’t originally built with rear seat passengers in mind. When Chinese buyers didn’t like the spartan accommodations in the back, Tesla was able to respond with optional “executive rear seats” that are significantly more plush than the regular ones.
“We know Chinese customers like to be driven so they want something a little plusher. That’s one of the benefits of our direct-sales method. We can react much faster to these types of requests,” said Dan Hsu, the head of Tesla’s Chinese training program.
Customers have also complained that some of the other features don’t have the Chinese buyer in mind. The map for the GPS is unpopular and should probably be based on a more familiar version from a more popular Chinese company. Additionally, the list of supported apps doesn’t include a number of very common ones, such as QQ music and Xiami.
In response, Hsu said that “there are some features that we don’t have in China yet, but they’re coming. That’s one of the great things about our platform, is that it’s all available via software upgrades. We want to innovate as fast as possible.”
It may be great that software updates can include more available apps and a more familiar GPS, but the question is, why wasn’t that all taken care of before the Model S was introduced in China in the first place?
From a couple statements that Tesla founder Elon Musk has made, it appears that part of the problem is that initial demand came more from “speculators” who wanted to turn Teslas for a profit, not customers who wanted to own and drive them. Overestimating how interested Chinese customers were already there led Musk to enter the Chinese market too quickly, not taking the time to tailor the car to the market and make sure supply met demand. As a result, there are quite a number of unsold Teslas in China that were ordered and then never purchased.
The largest challenge that Tesla faces in China is also the most difficult one to address. Perhaps more so that Americans originally were, Chinese car buyers have serious range anxiety. Adding more charging stations will do a lot to help with that, but building stations takes time. Even if Tesla builds a charging station on every street, it’s going to be hard to alleviate range anxiety if the sales team continues to tell potential buyers that charging an electric car is difficult in China. Needless to say, Musk is putting a stop to that particular sales-sabotaging strategy.
One advantage of purchasing a Tesla in China is that buyers get the home charging unit for free, and Tesla is now even paying for its installation. While owners often start out looking for charging stations along their route, apparently they pretty quickly find out that the 200-plus miles range on the Model S is more than sufficient for their daily needs. For those who do need a charge along the way, Tesla is focusing on building Superchargers at popular destinations like hotels and malls.
The fear of finding ending up low on power and too far from a Supercharger still exists, even if it isn’t entirely rational. One solution is to give new owners mobile connectors that allow them to plug into any socket and get a charge. Charging a Model S from a wall outlet is slow, but it could potentially get a driver far enough to find a Supercharger or make it home. Mostly, the adapters serve to give owners a little more peace of mind.
In time, Musk will likely work out the kinks and find a way to get a Tesla into millions of driveways in China, but this is another classic example of a Western company moving into China and assuming that its business model will work in Asia the exact same way that it works in North America or Europe. There’s a lot of money to be made in China, but it’s not up for grabs for just anyone who wants to start selling overseas.
Anyone considering going into China needs to see Tesla as a stern warning that researching a new market matters. Every company has to be humble enough to take the time to figure out how its product fits into the Chinese market and develop a strategy that will often involve adapting products and services to fit the unique tastes of Chinese customers. On paper, that idea isn’t exactly ground breaking, but Musk is proof that even incredibly smart business people buy into the hype and end up wildly missing their projections because of it.
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