Tesla’s “China Dream” shattered? Public relations disasters in a row BYD, Azera rush to grab market share

Tesla’s “China dream” seems to have hit some snags. In April, Tesla’s sales in mainland China dropped by 27 percent from March.

According to the Land Passenger Vehicle Information Federation, Tesla sold only 25,845 electric vehicles in mainland China in April, compared to 35,478 in March. Although the overall EV market in mainland China also saw a 12 percent decline in sales, Tesla’s decline still far exceeded the market average.

Mainland China is Tesla’s second largest market after the U.S. Last year, Tesla’s mainland revenue reached $6.66 billion, accounting for about 21 percent of annual revenue, almost double the growth from the previous year. However, from 2021, Tesla’s friction with the mainland Chinese government is growing by the day.

In the first quarter of this year, Tesla still generated $3 billion in revenue in mainland China, almost three times last year’s revenue and reaching 30 percent of overall revenue.

Tesla China sales down 27%, “Reuters” comment may lose leadership position

Dan Ives, an analyst at Wedbush Securities, said that Tesla’s sales in China fell 27 percent, and Reuters commented that it may lose its leadership position. Dan Ives said Tesla’s sales in April were lagging compared to the sales growth of electric car start-ups such as Azera, Xiaopeng and Ideal, claiming that Tesla is facing a public relations disaster, partly due to safety concerns and protests at the Shanghai auto show.

At the Shanghai Auto Show in April, a female owner wore a shirt that said the brakes were not working to the Tesla booth, accusing the company of having a software bug that caused the braking system to malfunction. Tesla strictly denied any suspicion of brake failure and released the data records before the crash.

However, the mainland official media joined the ranks of Tesla in the follow-up, publishing a number of comments accusing Tesla of ignoring consumer rights, and even the more intense suggested that Tesla should be expelled from mainland China. Tesla then lowered its stance and admitted its fault, and plans to launch a public data platform for mainland Chinese owners within the year, allowing them to check their own driving data.

Earlier it was even reported that Tesla has suspended plans to buy land and expand its plant in Shanghai due to growing tensions between the U.S. and China, abandoning plans to make Shanghai its global export hub for electric vehicles.

According to Reuters, Tesla has abandoned its plans to expand its Shanghai plant capacity and did not participate in the bidding for the land adjacent to the Shanghai plant. But Tesla officials would not respond to this, saying only that everything is going according to plan.

It was originally estimated that mainland China would account for more than 40 percent of Tesla’s overall sales by 2022, and that the gross margin for the land-based Model 3 would be higher, but now tensions with the mainland Chinese government are increasing, making all this an unknown. Reuters even commented that Tesla may lose its leadership position in mainland China’s electric vehicle market.

Although Tesla’s current global demand is enthusiastic, coupled with the shortage of automotive chips has also been burned to the electric car leader, the decline in the Chinese mainland market may not have a significant impact on the overall, but in the long term, mainland China as the world’s largest electric car market, Tesla may still have to play a good relationship with the Chinese mainland government.

The continued rise of new electric vehicle creations in mainland China may accelerate the threat to Tesla’s position

And as Tesla’s sales decline, competitors in mainland China are catching up. BYD, which has been invested in by Warren Buffett, sold 25,450 units in April, nearly matching Tesla’s performance. And while Azera, Ideal and Xiaopeng did not release specific figures, the report mentions that sales of these start-ups remain excellent compared to the same period last year.

In the fourth quarter of 2020, the number of vehicles delivered by Xiaopeng reached 12,964, a 303% jump compared to the same period a year earlier, and losses shrank to RMB787 million; Azera delivered 17,353 vehicles in the fourth quarter of last year, a 111% increase compared to the same period a year earlier, while losses The number of vehicles delivered in the fourth quarter of last year was 17,353, up 111% from the same period a year earlier, while losses shrank 48% to RMB1.49 billion.

JP Morgan recently noted that Chinese EV start-ups such as Azera and Xiaopeng are expected to compete with Tesla for market share in the global market, pictured here is the ET7, Azera’s flagship smart electric sedan.

J.P. Morgan analyst Oliver Cox, who has been working on the project for more than a decade, said that the company is expected to compete with Tesla for market share. Oliver Cox said that Azera and Xiaopeng are doing very well in terms of management execution, product quality, market share and growth trends, and that losses are not a big problem when it comes to expanding capacity and improving quality.

Cox even said that these Chinese mainland EV start-ups have three advantages, with professional production knowledge, software integration capabilities, and reliable investors such as Tencent or delivery giant Meituan.

If Tesla is unable to regain the hearts and minds of the Chinese government and public, the time to meet the challenge of Chinese start-ups in the global market may be much earlier than originally estimated by the outside world.