Tesla Announced Free Charger and Free Installation in China Market

When you purchase a Tesla Model S in US, it only comes with a free mobile connector as standard. This mobile connector only lets you charge your Model S using the regular 110V household outlet, provides 29 miles of range per hour.

If you want to charge the Model S faster, you need to use Tesla’s Wall Connector, which is installed on a 240 volt circuit, and supplies up to twice the amperage as a regular 110V outlet. However for US market this is not free: it cost you $750 for the parts, plus the installation labor.

We all know Tesla did not do well in China recently. Veronica Wu, Tesla’s former China region president, has resigned last December. Although Tesla did not provide the reason, rumors within the insider circle points to one single explanation: it is due to the disappointing 2014 annual sales in China.

Tesla is trying to fix the issue. Yesterday, Tesla announced that it will offer free wall charger and free installation for any customer who purchases a new Tesla vehicle after Jan.1, 2015, in China. Previously, Chinese customers only get the free wall charger, but they need to pay for the installation.

However, there is fine print for this deal. The full policy is: your address need to be within 350km from a Tesla service center, and the charging cord need to be less than 30 meters.

From our point of view, this will not help too much for the sales, because we do not believe Tesla really understand the China market and Chinese consumer’s psychology. Let’s see the below example.

In US, a BMW 535i xDrive M Sport costs around $8,000 LESS than the Model S 60kWh; but in China, the same Model S carries a price tag of RMB 648,000, while the BMW 535i’s price starts at RMB 809,000. Such difference becomes more prominent for higher trims such as the Model S P85D.

Let’s also take the P85D and the Mercedes S550 as example, since they are within the same price range in US. In China, the Mercedes S550 costs at least TWO times of the P85D (P85D MSRP is RMB 949,500 in China, but S550 costs more than RMB 2 million).

For your reference, the BMW 5 series and also the Mercedes-Benz S class are extremely popular in China. So we can see the reason why Tesla did not do well in China: because it sets the price too low. Customer in China who can afford cars more than RMB 500,000 really cares about its social status. The major factor that sets a car’s status in China is: how expensive it is. Yes that’s right: performance and technologies are less irrelevant; instead, brand image matters. Bottom line: people who are wealthy enough to pay more than half-million RMB to buy a Tesla in China, will not mind paying another 10k – 20k for the charger.

You may feel this does not make sense at all, however it is a reality in China.

In short, luxury vehicles in China is a typical example of Giffen Goods (a term in economics theory, which indicates a product that people will buy more if the price rises, essentially violating the Law of Demand). Therefore, understand the market is the key success factor.

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