China has always been the 'wild card' in what TM will look like in 5-10 years. It is becoming more apparent to me that the key to the China market may be the establishment of a factory there.
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China has always been the 'wild card' in what TM will look like in 5-10 years. It is becoming more apparent to me that the key to the China market may be the establishment of a factory there.
I'm concerned about the announcement of the state-owned 120 kW chargers will mesh with Tesla's strategy. Were I in China, I wouldn't want to buy a Model S until I understood how this new network works with the car. Am I just being unreasonably concerned about this pro-EV action having negative repercussions (at least in the short term) for Tesla?
I think the biggest problem is actually model transition. It's hard to buy a vehicle that you know is going to be replaced soon with a new model. The D variants disruption is likely to be felt most acutely in markets that have the longest delivery times. It also affects the used market, as the used market was pretty bone dry in, say, September 2014 in the U.S. and then exploded after the D variants became reality. For speculators that bought extra stock, it's an even bigger problem.
I have China modeled at 15% of 2014 sales, which is far lower than I think Tesla was hinting before in early 2014 before deliveries started. They have been progressively backing down since then. I think that's at a level of disappointment overall, but since Tesla is still production constrained, there is demand that can be filled elsewhere.
I think the X delay probably hurts Tesla in China more than, say, the U.S. I hope that Tesla has a limo-esque version of the X interior slated for production as I think that market will explode with X demand.
Honestly I've written China off for now. If they get the right people China could become a big market but for now the US is going to be the strong leader. Especially with a strong dollar. Of course way more than 42k sales this year.
Gerasimental
Member
Can people who have been following things more closely than me say whether there is any lag between the expansion of infrastructure (SCs & Stores) and increased demand?
I feel like new Stores may cause a brief spike in demand as people see them go up, but overall brand visibility can take a while to have an effect, and non-enthusiasts won't follow each individual SC opening, so the expansion of the SC network is also a slow process and takes some time to filter through to potential buyers. And of course many buyers don't just buy a 100k car on a whim. There's likely to be deliberation and comparisons with others cars (test drives etc) before they commit to the buy.
I imagine many of these effects would be amplified in China for several reasons, so it's possible we'll only see the demand increase resulting from infrastructure expansion start to kick in in the next few months.
With its stores, Tesla has followed Apple's strategy of placing them in high-end shopping areas with lots of foot traffic. While I haven't seen any statistics about it, such locations have to have some positive impact on sales; that's certainly been my experience hanging out at stores, that they draw in the merely curious and begin the process of them thinking about buying.
The impact of service centers is different, I think. Once someone begins to think "maybe," they start looking for reasons not to proceed. Two obvious questions are, "where can I get it serviced?" and "where can I charge it?" Service Centers and SuperChargers are there to check those boxes.
The impact of service centers is different, I think. Once someone begins to think "maybe," they start looking for reasons not to proceed. Two obvious questions are, "where can I get it serviced?" and "where can I charge it?" Service Centers and SuperChargers are there to check those boxes.
Gerasimental
Member
Yeah, I get what you mean about the stores.
I feel like it's naive to assume that Chinese buyers would react in the same way as EU and US buyers to that kind of store. Maybe maoing can give more insight into this? Anyway, my gut feeling is that lower-than-expected demand in China despite large efforts isn't that worrying and that we still need to wait until Tesla's growing presence in China has its full effect on demand.
Tesla needs to reach some level of popular brand recognition and ubiquity in China, and that took much longer than a year even in the US, a country a quarter the size of China and the home country of the company.
I feel like it's naive to assume that Chinese buyers would react in the same way as EU and US buyers to that kind of store. Maybe maoing can give more insight into this? Anyway, my gut feeling is that lower-than-expected demand in China despite large efforts isn't that worrying and that we still need to wait until Tesla's growing presence in China has its full effect on demand.
Tesla needs to reach some level of popular brand recognition and ubiquity in China, and that took much longer than a year even in the US, a country a quarter the size of China and the home country of the company.
Gerasimental
Member
Metal Bumper Obvious Honoreable. How I love these things.
Interesting although you can buy a phone cover with just about ANYTHING on it in China, so I won't take this as absolute proof of Tesla's universal cult status in China
Still cool to see. I'd also like to hear personal views out of China about Tesla's ubiquity and perception of it.
In the recent Q&A with Elon he says they resolved communication issues and 'China will be in a pretty good shape towards the middle of the year'.
They have also massively expanded the sales network to 9 stores, if the sales only rise to the level of Q3 2014 by mid 2015 it would be disapointing.
I think the reason is not the charging but the massive amount scalpers that bought cars, magnifing demand in Q1/Q2 and then competing for sales with new cars in Q4, the underlying demand was just that strong, my opinion.
I think the reason is not the charging but the massive amount scalpers that bought cars, magnifing demand in Q1/Q2 and then competing for sales with new cars in Q4, the underlying demand was just that strong, my opinion.
Gerasimental
Member
Yeah, i was glad to see that. It would have been nice to have some specifics on what the communication issues were and how they were resolved. Also what about the matter with people living in high-rise apartment buildings and condos? I wonder if that was a part of the problem. But yeah, as I said i feel bullish for China in 2015 and am glad Elon hinted in that direction as well.
Completely agree. That's why I was trying to figure out how they accounted for the 'Wu cars' as I call them.
BTW, don't know if this has been said recently, but I would like to point out that Ingenieur had been attacked in the past for his analysis of what he thought was happening in China. While we don't have concrete proof of everything that has been going on in China (as in, we don't have Tesla internal spreadsheets of China sales), I think it is safe to say that Ingenieur's past comments fit with Elon's comments yesterday that China sales were poor in 4Q, although Elon blamed poor public understanding of charging infrastructure rather than blowback from scalper sales.
In the past I've never called BS on what Elon has said (well, I don't agree with him on AI, nor on the lack of need of AI for autonomous driving, but those are differences of opinion, not calling out a lie or misdirection), but in this case I am sorely tempted. At the very least, I don't think Elon has told us the whole truth about poor sales in China.
BTW, obscuring a region's poor sales isn't anything new for Tesla. Germany was supposed to be a big market, as per Elon comments, and then they started selling in Europe. Elon never mentioned Germany again in regards to high sales, and registration information shows that sales there have been lackluster.
All of which isn't necessarily bad news for Tesla (except for the stock price), because as Elon also said yesterday, sales in the rest of Europe and in the US have MORE than made up for anticipated sales in China that never materialized. So, as usual, we will have to wait for 4Q earnings to see what this all actually means.
In the past I've never called BS on what Elon has said (well, I don't agree with him on AI, nor on the lack of need of AI for autonomous driving, but those are differences of opinion, not calling out a lie or misdirection), but in this case I am sorely tempted. At the very least, I don't think Elon has told us the whole truth about poor sales in China.
BTW, obscuring a region's poor sales isn't anything new for Tesla. Germany was supposed to be a big market, as per Elon comments, and then they started selling in Europe. Elon never mentioned Germany again in regards to high sales, and registration information shows that sales there have been lackluster.
All of which isn't necessarily bad news for Tesla (except for the stock price), because as Elon also said yesterday, sales in the rest of Europe and in the US have MORE than made up for anticipated sales in China that never materialized. So, as usual, we will have to wait for 4Q earnings to see what this all actually means.
Buddyroe
Active Member
You won't necessarily find out in the Q4 ER either. Tesla doesn't break down sales by region. We will still be left to try to figure out what the sales numbers were for each country/region.
It's unfortunate that Chinese market turns out not to be as many wished. I had this worry before and am afraid that it is more than simple infrastructural problem that could be improved. It might be a cultural as well as an economic issue that cannot be fixed easily. Below is my post when Model S was introduced into Chinese market. I re-post it here now:
1. As I said in my previous post, Tesla is red hot in China but for different reasons. Chinese are eager to show off their newly acquired riches. Car is considered as the prominent sign of status. Many of those who drive 7 series or S classes have very simply homes because their homes can only be seen by themselves, not others. This is why Ikea is considered as an upscale home store in China and bed quality in most Chinese homes are very poor.
2. For the above reasons, I initially doubted Tesla's "low price" policy in China. Everyone in China including 5 years old kindergarten kids knows the price difference between a 740 and an A8. Even the driver, I mean the one who is hired to drive cars by his rich boss feels embarrassed when his A8 is parked next to a 740. I was literally told so by an A8 driver
3. "The upper middle class can also afford Model S with current price tag". This is simply not true. It's a huge misleading. The price is beyond reach of most doctors, small business owners and upper managers of most private companies.
4. A big issue is charge. Most Chinese live in apartments. It is difficult for them to install chargers. Many simply don't have dedicated parking spots.
5. I guess that it is not difficult to find early adopters in big cities like Beijing and Shanghai where US technology and western lifestyle are eagerly shown off by rich and trendy people. It is hard to predict how quick and deep the fashion can penetrate to the 2nd and 3rd tier cities.
1. As I said in my previous post, Tesla is red hot in China but for different reasons. Chinese are eager to show off their newly acquired riches. Car is considered as the prominent sign of status. Many of those who drive 7 series or S classes have very simply homes because their homes can only be seen by themselves, not others. This is why Ikea is considered as an upscale home store in China and bed quality in most Chinese homes are very poor.
2. For the above reasons, I initially doubted Tesla's "low price" policy in China. Everyone in China including 5 years old kindergarten kids knows the price difference between a 740 and an A8. Even the driver, I mean the one who is hired to drive cars by his rich boss feels embarrassed when his A8 is parked next to a 740. I was literally told so by an A8 driver
3. "The upper middle class can also afford Model S with current price tag". This is simply not true. It's a huge misleading. The price is beyond reach of most doctors, small business owners and upper managers of most private companies.
4. A big issue is charge. Most Chinese live in apartments. It is difficult for them to install chargers. Many simply don't have dedicated parking spots.
5. I guess that it is not difficult to find early adopters in big cities like Beijing and Shanghai where US technology and western lifestyle are eagerly shown off by rich and trendy people. It is hard to predict how quick and deep the fashion can penetrate to the 2nd and 3rd tier cities.
RobStark
Well-Known Member
This 1000 units per month number in Germany is complete BS. Tesla guided for 35K units in 2014. Elon never said Germany would account for more than 33% of total sales or 12k units at 1k per month. He said Germany had that potential. When he delivered the first cars in the UK he said the UK has the potential to be the biggest market in Europe. Every country he goes to he talks up the potential of that market for Tesla. In the same vein he said yesterday in Detroit he thinks Tesla will be selling several million units in 2025.
Saying that Q4 2014 in China was less than surprisingly good European numbers and that Dec 2014 China orders were weak is not the same thing as Tesla China tanking or in dire straights. Chinese customers may be confused about installing charge points in their condos, waiting for Chinese authorities to give a final ruling on EV subsidies for Tesla, waiting for rumored Executive Seating option or a whole host of short term problems.
1. Agree with you that people should be free to post different opinions without being called names
2,3. Elon does not have an obligation to provide granular details on Tesla China business. His words get parsed, twisted, taken out of context, blown out, misinterpreted and naturally he is becoming more cautious with his words. Also, no one including Elon may have a ready answer as to why there is a weakness in China. Elon is often asked difficult questions that people assume he has an exact answer. His businesses operate in uncharted territory and answers are not readily available. How can he tell us the truth when he is working so hard to uncover what that truth is?
4. From listening to many of Elon's talks, I never got an impression that he was involved in Tesla with the ultimate goal of creating a profitable business. In the case of Tesla, a profitable business is a means to an end, to help propagate sustainable transportation. With such goal in mind, he is not motivated or incentivised by TSLA movements. If someone achieves as much as Elon achieved so far, money is highly unlikely to be a motivator or a driver or even a consideration. He clearly stated in his last talk that he does not care for short term traders in TSLA.
Krugerrand
Meow
I believe Elon said that the communication issue was about charging, specifically that the Chinese market was under the impression that it would be hard to charge the Model S. It is being resolved by increasing the size of the SuperCharger Network, and better consumer education via the new employee who took over Wu's position.
There was also the issue of the Model S not being a good chauffer type car. With the addition of the new back seat options, that's also been addressed.
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