Tesla is on a charm offensive in China. Elon Musk, the company's Technoking, recently praised Chinese electric car manufacturers, calling them "the world's most competitive".
He has also pledged to increase funding for electric vehicle manufacturing and development in the country. His firm has promised to create a data center in China to ensure that individuals' personal information does not leave the nation. The company's efforts to improve relations with the government are part of a broader strategy to expand its footprint and market share in China.
After a rather successful debut last year, Tesla's foray into China may appear surprising and belated. However, the company's efforts are an attempt to mend fences with the ruling party and stem a sharp drop in auto sales in the country. Tesla has been buffeted by a spate of negative reviews and bad press this year.
While Tesla has amassed legions of devoted fans throughout the world, it has also clashed with a number of loud unsatisfied consumers in China, who have rallied support through social media campaigns. In the most high-profile episode, at the Shanghai car show in April, a female consumer climbed atop a Tesla exhibit in a protest that rapidly went viral.
The company was then called by Chinese regulators, who launched a quality-control probe into its automobiles. A tragic May collision involving a Tesla car and a truck aggravated the situation. Tesla's problems in China are not limited to safety concerns. Due to privacy concerns, the country's military has also barred Tesla automobiles from its bases.
Tesla vehicle sales have suffered a hit as a result of the developments. According to figures from the China Passenger Car Association, sales fell by 60% during March and April compared to the prior months. They had dropped by 69 percent by August, and the corporation had only made 8,621 deliveries to Chinese customers. The company's Shanghai plant's remaining output was destined for export.
And more bad news came this week when a Chinese motorist successfully sued Tesla Inc. for fraud in connection with his purchase of a used Model S, adding to Elon Musk's electric-car pioneer's string of losses in one of its most significant markets.
According to a copy of the judgement Han Chao posted to his Weibo account, a Beijing court concluded Tesla had misrepresented the condition of the car he acquired for 379,700 yuan ($58,700) on the automaker's official used-car platform. The automobile was discovered to have undergone extensive repairs after an earlier collision, and the court rejected Tesla's claim that traces of welding indicated no "structural damage."
Tesla was ordered to refund the cost of the car and pay damages of three times the purchase price, bringing the total amount to more than 1.5 million yuan. According to Chinese media site Caijing, this is the first time Tesla, based in Palo Alto, California, has been hit with such a significant penalty in China.
Meanwhile, Tesla's competitors have grown in China. XPeng Inc. (XPEV) and NIO Inc.(NIO), both publicly traded firms, are among them. So, Tesla has lost ground in China's electric vehicle sector, as these competitors have risen.
Tesla's recent issues signal a shift in the company's fortunes from 2020. China greeted the enterprise with open arms. The Model 3 became a best-seller in 2020, and it was the first manufacturer allowed to fully own its subsidiary in China. Tesla obtained large government subsidies in a country where its Model 3s, which are aimed at economic travellers, are considered premium automobiles.
Elon Musk will no doubt pull out the stops to regain traction in the Chinese market as it is an extremely important market for Tesla.