Global Tech

Tesla Looks for New China Formula

(Image via Shutterstock)

(Image via Shutterstock)

After roaring into China last year on a wave of hugely positive publicity, electric car superstar Tesla has rapidly lost momentum and now appears on the cusp of a major overhaul in a bid to jump-start its prospects. This kind of development isn’t hard to understand, as Tesla’s charismatic CEO Elon Musk set the bar incredibly high when he sold his company’s first electric vehicle (EV) in China last April.

One of Musk’s and Tesla’s obstacles has been Chinese consumer reluctance to buy EVs, despite Beijing’s strong desire to promote the clean technology. But Tesla’s target market was never really the mainstream consumer anyhow, and instead Musk was pursuing wealthy, status-conscious people who like to be first adopters of trendy new technologies. In that regard, Tesla’s marketing efforts have also sputtered despite Musk’s strong launch for his brand in China last year.

I wasn’t surprised by the latest reports saying Musk is preparing to fire some of his key international managers, since Tesla’s China chief left the company in December after just nine months on the job. But what did surprise me was just how weak Tesla’s China sales were. According to the latest reports, the company sold just 120 cars in China in January, translating to an annual sales rate of 1,440 cars this year. That’s a far cry from previous reports that said the company was targeting 2015 sales ranging anywhere from 4,000 to as many as 8,000 vehicles.

Musk isn’t used to failure, and the latest reports say he’s sent out an email threatening to fire or demote more country managers unless they can demonstrate a “clear path to long-term positive cash flow.” It’s a bit unclear who exactly received the e-mails, though it seems unlikely they would have been directed at anyone in China. That’s because any country managers there would be quite new, and it’s also quite possible Tesla hasn’t even hired anyone yet to replace outgoing country chief Veronica Wu.

Tesla was holding out big hopes for China a year ago, saying its sales there could quickly grow to levels comparable in its main U.S. market. But the market has been much slower to take off than expected, and Musk previously said that China sales were unexpectedly weak in the fourth quarter. He promised to fix the problem and be back on track with his aggressive growth targets by the middle of this year.

People like Musk tend to be very marketing-savvy and in control of their companies, and I suspect this latest email threatening firings was leaked to the media with his direct knowledge, or at least the understanding that he wouldn’t object. Some may blame China’s broader sputtering EV initiative on lack of infrastructure and consumer confidence, which has hurt the prospects of companies like BYD that are targeting more mainstream Chinese car owners.

But as I’ve said above, Tesla’s problems in China owe more to a lack of savvy marketing and perhaps weak customer support. Musk gave his company a huge boost by generating non-stop publicity during his trip to China last spring for its first sales, creating plenty of buzz and positioning Tesla as a top-tier brand. But the executives who ran the show after his departure clearly couldn’t maintain the momentum, and Tesla has largely disappeared from the headlines since then.

All of that said, the big question is: What’s next for Tesla in China? The answer is that the company’s local operations are clearly broken, and Tesla badly needs a marketing-savvy person who understands Chinese thinking to fix the situation. Such people certainly exist, and the key will be for Musk to find one such person who can build a strong marketing team. If he does, which seems likely, I could envision a turnaround for the company around the middle of the year, which would start with a new campaign launched by Musk himself.

Doug Young lives in Shanghai and writes opinion pieces about tech investment in China for Techonomy and at www.youngchinabiz.com. He is the author of a new book about the media in China, “The Party Line: How the Media Dictates Public Opinion in Modern China.

Tags: , , , ,