Tesla Motors Company in the Chinese Market

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Electric cars are a technological innovation that is not only convenient, but also environmentally friendly. However, this is a new product, and its manufacturers often face various complications in the market. In this paper, we will discuss the strategy of one of electric vehicles manufacturers, “Tesla Motors”, specifics of its entry into the Chinese market, and, after looking into the results the company received, we will consider possible ways to improve its performance.

“Tesla Motors” is an American company that specializes in producing and selling electric cars (“About Tesla”, n.d., para. 1). It was founded in 2003 by Silicon Valley engineers; the vehicles are produced in Fremont, California, and more manufacturing facilities are being opened in the USA and the Netherlands (“About Tesla”, n.d., para. 7-8).

Some of the company’s estimated strengths are: innovative technologies; high-performance products of attractive design; good reputation among both their clients and the media; and the “first mover” advantage in the market of electric cars in some countries (Mangram, 2012, p. 302). However, the company weaknesses are, among others, clients’ worries about possible problems with the product’s usage (the so-called “range anxiety”, resulting from scarce opportunities to recharge the car while traveling); high cost of the products; the dearth of supply of the product in case of high demands (Mangram, 2012, p. 302).

Mangram (2012) observes that the crux of Tesla’s strategy is manufacturing high-performance cars and selling them as high-margin luxury products (p. 289). The rationale behind this strategy is that it is typical of new technologies to be expensive and only affordable to the rich (Mangram, 2012, p. 304). At the same time, when the technology becomes less expensive, the company aims to eventually produce an affordable family car (Musk, 2006, para. 2).

“Tesla Motors” was planning to open its first shop in China in spring 2013 (Perkowski, 2013, para. 2). The company does not practise such an entry mode as franchising, and the shop was established as a sales representative, selling the product directly to the customers, for “Tesla Motors” believes this results in various benefits for the customers, such as the company’s ability to react to the clients’ demands faster (“Musk reboots Tesla’s China strategy”, 2015, para. 12).

Perkowski (2013) observes that the company believed their enterprise in China was going to be successful due to a number of reasons; some of them are high level of air pollution on Beijing and the need to decrease it; the state’s wish to lower its dependence on imported oil (which was supposed to result in governmental support in this country); and the promising Chinese luxury car market (para. 6). On the other hand, Perkowski (2013) then refutes these claims; he asserts that the smog in Beijing is primarily due to factories, as well as diesel buses and trucks, and not due to personal cars which already must meet high ecological standards (para. 9). Moreover, the Chinese government usually tends to favor home manufacturers of electric vehicles, so “Tesla Motors” is unlikely to get advantages from the government.

The results achieved by Tesla Motors in the Chinese market turned out to be poorer than it was expected, even despite the initially successful entry (“Musk reboots Tesla’s China strategy”, 2015, para. 4). A major hindrance that was not perceived at first is the “range anxiety”; traffic jams are extremely large in big Chinese cities, whereas the opportunities to charge cars are scarce; therefore, potential customers often worry about the inability to recharge their car while traveling. Another problem that emerged was the inability of the company to provide its clients with the product on time; buyers sometimes had to wait for nearly half a year until their cars arrived (“Musk reboots Tesla’s China strategy”, 2015, para. 2). Moreover, the after-sales service is reported to have been poor (“Tesla resets its China strategy”, 2015, para. 4).

“Tesla Motors” has already taken steps to neutralize some of the factors which negatively affected the company. For instance, it has started to provide its buyers with free home wall-charging units; it is also planning to release mobile connectors which would allow the car owners to recharge their car batteries using any outlet (“Musk reboots Tesla’s China strategy”, 2015, para. 19-20). The organization is also establishing a large network of Supercharger units in China, where electric car owners could recharge their vehicles (see Appendix A) (McKenna, 2014, para. 10).

To deal with the problems the company has faced, we would recommend enhancing its supply chain in China, for the situation when a customer has to wait for nearly half a year is definitely not beneficial to the clients’ perceptions of the company. It would also prove useful to enhance the post-sales service of the cars, for its low quality is able to seriously harm the company’s reputation.

These recommendations might entail creating new units throughout the region and further expansion of the company into the Chinese market. If the company does well enough in this country, they might even consider opening a local manufacturing facility to neutralize the lack of production output and create the opportunity to produce vehicles for the region. This will also allow easier transporting of cars to other Asian countries, which might become even more profitable when the company finally launches its long-expected affordable family car into the market.

As we have seen, “Tesla Motors”, despite initial expectations, have faced some serious complications in the Chinese market. This is not surprising, given the facts that the product is young, and that the company didn’t have much experience of working in China before. However, the company has taken steps to make up for the complications, and is likely to become an important part of the Chinese market.