China is one of the biggest auto markets in the world in terms of number of vehicles sold. Tesla Motors, Inc. (TSLA) intends to capitalize on opportunities in the country and believes that sales in China will account for one-third of its global growth in sales this year.
Tesla plans to open 10 to 12 stores in China by the end of 2014, including the flagship store in Beijing which was opened in Nov 2013. With this, Tesla expects its foray into China to account for 30%–35% of its global sales growth in 2014. Overall, Tesla plans to double the total global sales this year.
Moreover, Tesla has resolved the trademark issue with a local businessman, who had registered the name ‘Te Si La’. Earlier, the automaker had opened its flagship store, but it was unable to trade under the popular Chinese name. However, the dispute has now been settled.
Recently, Tesla’s Model S electric sedan has been priced at 734,000 CNY ($121,370) in China. The price has been fixed after adding the costs of shipping, VAT and import duties to the U.S. pricing. This makes Model S one of the low-priced vehicles in the Chinese auto market.
Model S is integrated with a premium 85 kilowatt hour battery pack, which enhances its competitive position against Volkswagen AG’s (VLKAY) Audi S5 sedan and Bayerische Motoren Werke AG’s 5-series GT sedan. Tesla expects Model S shipments to China to equal the U.S. sales volume by 2015.
Electric car producers, including Tesla, are not interested in setting up production units in China. The Chinese government demands technology sharing with the local partners for the vehicles to be considered as domestically produced vehicles. This may adversely affect the company in long run.
Tesla designs and manufactures electric vehicles and electric vehicle powertrain components for partners including Toyota Motor Corporation (TM) and Daimler AG (DDAIF). The company currently carries a Zacks Rank #2 (Buy).
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