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Tesla Makes Inroads for Its Electric Car
Posted by: Quantum Research (IP Logged)
Date: April 30, 2014 05:24PM

Tesla (TSLA) launches its first electric car in China. The newly launched Model S, a sedan has been delivered to eight customers in the mainland. They are planning to build charging stations all over the country but for now the cars can be charged from wall socket only.

Targeting a Charged-Up Market

China has been on the top list of all the automobile companies as it is a developing country. There is huge room for growth in the economy as the car ownership rate in the country is less than 80 per 1,000 people. And as per capita income and discretionary income is rising, people tend to improve their life style and standard of living. Automatically they tend to keep aside a part of their earning in purchasing a car.

The middle class of China has been increasing rapidly and so their demand for luxury cars is also increasing. Another factor working in favor of Tesla is the fact that the Chinese government is in support of the adoption of electric cars as the nation is facing the threat of increased pollution level.

The Plan

Tesla plans to establish manufacturing units of electric cars in China in the next three to four years. As of now they are planning to invest millions on the infrastructure of the setup of the charging stations across the country. Now here lies the main challenge of launching an electric car. There are huge infrastructural costs related to making electric car more viable on the roads. Once more and more charging stations are available, higher numbers of buyers would consider buying an electric car.

Tesla plans to set up solar panels in the charging stations to show that the cars can run independently without the usage of coal. The U.S. is most likely to be the producer of batteries - mainly its four states Arizona, New Mexico, Nevada and Texas. In all possibilities, Panasonic is going to be their partner in the production of batteries. They have planned to start construction simultaneously in two states, so that just in case any issue turns up with one at least the other will have work in progress.

Tesla decided that if electric cars do well, it will probably set up manufacturing units there in China itself so that they do not have to pay import tax. This will also make cars cheaper comparatively. On the contrary, auto majors such as General Motors (GM) and Nissan Motor (NSANY) have decided that they will not setup manufacturing units instead they will import cars to China. In such a case, the cost of Nissan and General Motors cars will be way up because of import duties, prices would be higher that would in turn limit their sales. This could act in favor of Tesla.

Extra Careful

Tesla was suppose to give delivery to their customers long before, but they had delayed the delivery purposely so that no problem could arise after the cars were sold. They wanted to be doubly sure about the quality and safety of the car before launching it in the Chinese market, and not repeat the same mistakes which they had faced in the European markets. Elon Musk the CEO of Tesla personally apologized to his customers for the delay.

Summing Thoughts

Tesla is a new company and it plans to expand its business in China and open itself to the global arena. Electric vehicle sales seem to have great potential in future and so all automobile companies are developing it. Tesla plans to sell more than five thousand electric cars in China. They are building up a chain of charging stations across the country so that it’s easier for people to use electric cars. With the pollution level increasing and the rate of fuel going up, electric cars could be the future of automobile.

Stocks Discussed: TSLA, GM, NSANY,
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