Tesla struggles in China

California utility Pacific Gas & Electric (PG&E) plans to build 25,000 charging stations in the Golden State. A sign that it’s banking on the electric mobility market to grown considerably. But the situation appears less bright across the Pacific Ocean, where Tesla sales have dropped. John Dyer reports from Boston.

Tesla CEO Elon Musk has warned of plans to fire top managers in China because of poor sales of the Model S there. (Photo credit: Tesla)

Tesla CEO Elon Musk has warned of plans to fire top managers in China because of poor sales of the Model S there. (Photo credit: Tesla)

American electric carmaker Tesla is hitting road bumps in China. As the company generates significant buzz at home – in California, electric car charging stations are cropping up like mushrooms – Chief Executive Officer Elon Musk is set to fire executives in China who aren’t moving cars off the sales floor.

Managers have to go

“We have no choice in this regard,” Musk wrote to his managers in China in an e-mail obtained by Reuters on Tuesday. “There is no way that we can afford to subsidise a region of any size in the long term without causing serious harm to the company.”

Musk reportedly sold only 120 luxury Model S cars in China last month, well below his target of selling nearly 20,000 cars in China this year, around the same amount as in the US, according to research firm Autodata. Tesla has sold a total of 3,500 cars in China, less than the 5,000 cars Musk has said he wanted to sell in China by now.

Tesla intends to sell around 50,000 cars annually this year. The southern California firm is now building a battery factory so it can boost that number to half a million in the next 15 years. By 2025, Musk hopes to be selling a few million cars a year, he said last month.

China promoting electric cars

China’s consumers are purchasing electric cars (80,000 last year), just not Tesla. According to Yale Zhang, managing director of Shanghai-based consulting firm Automotive Foresight, that figure illustrates how Chinese consumers are open to electric vehicles. The Chinese government is also keen on supporting electric vehicles to reduce carbon emissions and has announced plans to put half a million electric cars on Chinese roads in the next five years. But Tesla won’t benefit from this because Chinese consumers perceive the high-end car as a rich person’s toy, explains Zhang.

The Model S, currently Tesla’s only car, sells in the US for USD 70,000. In China that same vehicle costs USD 120,000, minus a USD 19,000 subsidy provided by the government. Price isn’t the only deterrence: Tesla’s cars require special charging technology that other charging stations in China don’t always support.

When Musk suggested sales in China were slumping last month, the company’s shares fell by 7 per cent. Since then, they’ve rebounded but now stand at around USD 216, Last year’s high was USD 291.

California plans to build charging stations

But Tesla’s commitment to the Model S is paying off in its home state. Three companies recently announced plans to radically expand the network of electric car charging stations throughout California, a move that could prompt more American markets to set up charging stations and boost electric car sales.

The utility Pacific Gas & Electric filed an application with California officials on Monday to set up 25,000 stations in California in the next five years. The costs would be underwritten by a small fee on all electricity customers. On Tuesday, Volkswagen’s America division announced a USD 10 million plan to build stations in the US. Last month, BMW North America, Volkswagen America and ChargePoint, a California-based electric station builder, announced plans to build a string of chargers from San Diego on the California-Mexican border to Portland, Oregon and from Washington, DC to Boston on the East Coast.

The Electric Drive Transportation Association recently reported that Americans bought more than 570,000 electric vehicles, including hybrids, last year, or only around 3.5 per cent of the total in car sales. While this figure is so small as to be negligible, the announcements to build new charging stations could be a sign that the electric vehicle market is on the cusp of dramatic growth in the US.

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