Tesla’s advertising nightmare in China comes at a crucial time
Beijing’s targeting of Tesla for the electric vehicle maker’s clumsy handling of a high-profile customer protest revealed weakness in the US group’s business in China as competition intensifies in the largest auto market of the world.
Tesla was embroiled in an advertising crisis in the country after Chinese state media accused the company of “being arrogant” in its approach to an argument with a customer who said a malfunction had caused the crash of his vehicle.
The unwanted attention comes at a tricky time for Tesla, whose market leadership position in China is under pressure from local challengers, as traditional automakers, start-ups and tech groups flood a fast-growing segment that still only represents 5%. of the country’s vehicle sales.
The controversy began on the opening day of the Shanghai Auto Show last Monday, when a woman wearing a t-shirt emblazoned with the words “brake malfunction” climbed onto a Tesla car and began to protest outside. the crowd and the media.
Tesla’s initial response that he would not compromise on “unreasonable” complaints drew a furious reaction from Chinese state media, which accused the group of “not being sincere.” The State Administration for Market Surveillance, China’s main regulator, said it was “deeply concerned” about the matter.
Tesla’s sales in China doubled to $ 6.6 billion in 2020, a fifth of the group’s global total. Late on Monday, the company announced that its revenue got off to a good start in 2021, thanks to a successful production ramp-up in China.
Its success was backed by the Chinese government, which enabled Tesla to become the first foreign automaker to operate in the country without a local joint venture. Thanks to funding from public lenders, the group was able to build its Shanghai Gigafactory in record time, enabling it to produce locally built cars.
“We can really think of China [electric vehicle] the history of the market as being divided between before Tesla and after Tesla, ”said Michael Dunne, founder of ZoZo Go, a US-based consulting firm.
Tesla “sparked a real flood of interest in electric vehicles from urban buyers” and ended a time when “99% of Chinese electric cars were cheap, short-range, no-frills cars, whose sales were almost entirely subsidized, ”says Dunne.
But Tesla’s popularity in the world’s second-largest economy, along with the global shift to electric vehicles, has also drawn attention to Beijing’s long-frustrated goal of creating an internationally renowned automobile brand despite the generosity of industry. “The Chinese Tesla, if you will, was not materializing,” said Ilaria Mazzocco, senior researcher at MacroPolo, a think tank.
The Chinese government wants a fifth of car sales in the country to be electric by 2025, and hopes that inviting Tesla to the country would further stimulate innovation among domestic players. “And they succeeded,” Mazzocco said.
Chinese rivals have responded with a host of locally made models. They include Nio, Xpeng and Li Auto, listed in the United States, as well as Zeekr, the premium electric car brand from Geely, which owns Volvo in Europe. Tech groups Huawei, Xiaomi, and Baidu, which have partnered with traditional carmakers, have joined them.
So far, none have come close to knocking Tesla off his perch. But the American group is passing more and more under the radar of the Chinese authorities.
In March, some Beijing military complexes banned Tesla owners from parking their vehicles inside closed quarters that house staff, fearing that in-car cameras could pose a security risk. Tesla chief executive Elon Musk denied the cameras could be used for espionage.
The string of negative coverage has left analysts wondering if the criticism reflects a broader shift in the Chinese government’s attitude toward Tesla.
Tesla’s 100% stake in its China operations has also proven to be a downside in some ways. “The only thing harder than having a partner in China is not having one,” said Dunne of ZoZo Go. “When things go wrong with regulators, no one advocates on behalf of Tesla outside of Tesla. himself. “
The quagmire of bad publicity for Tesla shows little sign of disappearing quickly despite the group’s repeated raids and public apologies following customer protests.
The company’s latest move was to release car data related to the driver’s crash in February. Protester claims her vehicle’s brakes failed, but data shows she repeatedly braked in the half hour before the crash and was driving nearly 40 km over the speed limit .
The statement did little to defuse the situation. The client accused Tesla of tampering with the data while her husband said the company move was a violation of the right to privacy.
Tesla did not respond to a request for comment on the matter.
“Tesla’s position on a global scale is that it is building a world-class product and that it will not compromise in response to customer complaints,” added Dunne. “And what they find is that this is not the right formula for China.”