China figures big in the future plans of Tesla (NASDAQ:TSLA), the Palo Alto, California-based electric car company that has captured the imagination of so many car enthusiasts — and investors. To illustrate how important China is to the company, Veronica Wu, Vice President of Tesla’s China operations, said earlier this year that she expects China to contribute “30 to 35 percent” of Tesla’s overall global sales growth targeted for 2014. At the same time, Elon Musk, Tesla’s founder, said that sales of Tesla electric vehicles in China would equal those in the United States as early as 2015. Taking these two statements together, Tesla expects its China sales to reach between 7,000 and 8,500 cars in 2014, and somewhere in the neighborhood of 25,000 cars in 2015.
Tesla opened its first store in China in Beijing on November 4, 2013, and the first Tesla arrived in Beijing on February 25, 2014. The company’s Beijing operations consist of both a retail store and a service center. The retail store is located inside the upscale Parkview Green mall in Beijing’s central business district, near The Place, best known for its massive LED sky screen. The service center is located on the outskirts of Beijing in neighboring Shunyi County, about 21 kilometers from the store. The store is used to showcase Tesla cars and to assist customers in ordering vehicles online, while the service center is where customers can pick up their cars when they arrive in China and where the cars will be serviced afterwards.
While Tesla plans to have stores in 10 to 12 Chinese cities by the end of 2014, according to Ms. Wu, Beijing is the only one that has opened on the mainland. Tesla also operates a store in Hong Kong, which is a special administrative region of China.
What’s it like to buy a Tesla in China? To find out, we went on Tesla’s Chinese website, then visited the Beijing store and spoke to sales representatives at both the store and the service center. The sales representatives explained to us that there are two Tesla models that can be reserved currently — the Model S, with a price range of RMB 734,000 to RMB 1.1 million ($120,000 to $179,000) and an SUV Model X where no price is yet available in China. Only the Model S is on display at the Beijing store.
In order to reserve a Model S, the customer pays a deposit of RMB 15,000 ($2,400), and is then given two weeks to customize his or her car. Once the car is customized, the customer pays a second deposit of RMB 120,000 ($19,500), Tesla Beijing places the order with Tesla US, and the service center sends a representative to the customer’s home to install a charger. The balance of the purchase price is due five working days before the customer picks up the car. The salesman pointed out that, even though the Tesla is an electric vehicle, it does not qualify for an electric vehicle license in Beijing. Therefore, Tesla customers must join the ranks of would-be car owners in Beijing to obtain a license plate through the lottery process that has been established.
The sales representative at the service center told us over the phone that delivery to Beijing would take four months, so that, if we ordered today, we could have our car in July. At the Beijing store, however, we were told that the Model S could not be picked up until September or October, and that the Model X would not be available until 2015. Through our industry sources, we learned that the first Model S Teslas won’t be delivered to customers in China until August.
How many orders has Tesla Beijing taken so far this year? The Model S on display at the Beijing store generates a lot of foot traffic, but any estimates as to the actual number of orders that have already been taken are very hard to come by. In late January, a Chinese website reported that more than 200 vehicle orders had been taken.
On March 4, a reporter from the technology section of Sina.com, one of China’s largest websites, said the following in an interview with Ms. Wu: “It is said that the orders of Tesla electric cars in China market has reached more than 1,000 vehicles.” Ms. Wu did not address that point directly. Instead, she told the reporter that “the number of orders Tesla has received per week in China is ranked as the first in the world. If the orders continue growing, the production capacity assigned to the China market will be increased accordingly.”
We tried through our industry sources to find a reliable estimate, but the best we could determine is that the number of orders from China is more than 1,000, but less than the 7,000 to 8,500 unit expectation for this year. What is puzzling is that our sources also tell us that Tesla will not be exhibiting at the Beijing Auto Show in April, when automakers from all over the world will come to China to showcase their new models. Given the importance of China to Tesla, this would seem to be a missed opportunity.
