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Tech

Tesla’s China problem

By
Kirsten Korosec
Kirsten Korosec
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By
Kirsten Korosec
Kirsten Korosec
Down Arrow Button Icon
March 10, 2015, 7:24 AM ET
Detroit Hosts Annual North American International Auto Show
DETROIT, MI - JANUARY 13: Elon Musk, co-founder and CEO of Tesla Motors, speaks at the 2015 Automotive News World Congress January 13, 2015 in Detroit, Michigan. More than 5,000 journalists from around the world will see approximately 45 new vehicles unveiled during the 2015 NAIAS, which opens to the public January 17 and concludes January 25. (Photo by Bill Pugliano/Getty Images)Photograph by Bill Pugliano — Getty Images

Tesla Motors’ international job listings say it all.

In Norway, a tiny country of 5.1 million people where the electric automaker’s Model S was one of the best-selling cars in 2014, there are about 90 job openings. In China, a massive economy of 1.35 billion people where weaker than expected sales led to executive turnover and a recent restructuring, there’s just one lone position.

That wasn’t the story nearly a year ago when the first Model S sedans were delivered to customers in China. Tesla (TSLA), aiming to meet lofty sales goals, went on a hiring spree (and eventually amassed a staff of 600 people), opened stores and service centers, and began an aggressive rollout of its network of free fast-charging stations known as superchargers.

Those efforts fell short. Tesla’s first year in China didn’t pan out as expected. The company sold an estimated 3,500 cars in 2014, below its sales goal and behind electric and plug-in hybrid vehicles produced by Chinese rivals BYD and BAIC. Sales continued to lag in the beginning of 2015.

Elon Musk, Tesla’s chairman, chief executive, and largest stockholder, has placed much of the blame on a misconception among Chinese consumers that charging is difficult there. During an earnings call last month, Musk said the company was working to fix that perception problem.

However, Tesla’s China problem goes beyond a failure to communicate and educate Chinese consumers about charging the Model S.

“This isn’t just a misconception, it’s a concrete problem,” said Lilia Xie, a research associate with Boston-based Lux Research. “China’s infrastructure, in many ways, is not ideal for supporting electric vehicles.”

Most families don’t have private garages and the population is very concentrated in urban areas. That means car owners typically park in public garages, on the street and at work, making it difficult to install private charging infrastructure, Xie said.

Tesla is offering free at-home charging in an effort to ease concerns and continues to add to its 200-plus network of superchargers. It’s also working with property owners of residential buildings to set up charging infrastructure.

Changing public perceptions in China is further complicated by consumers’ general misgivings about adopting new technology, particularly with cars. Xie said.

“China is hard to break into,” Xie said. “I think Tesla’s expectations were just too high.”

Tesla, which has projected it will sell 55,000 vehicles globally in 2015, will need to sell upwards of 1,500 cars to Chinese consumers each month if it hopes to hit its target, said Karl Brauer, senior analyst with Kelley Blue Blue.

“Between launching in China and launching the new Model X, Tesla is reaching a critical make-or-break point,” Brauer said. “It has to accomplish both goals successfully this year, plus keep its Gigafactory on schedule, or its stock price could drop quickly.”

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