Tesla Motors, Inc.
) Model S electric sedan has been priced at 734,000 CNY
($121,370) in China. The price has been fixed by adding the costs
of shipping, VAT and import duties to the U.S. price.
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This makes Model S one of the low-priced vehicles in the Chinese
auto market. However, Tesla is concerned that a low price may
adversely affect sales as customers often equate quality with
High-end cars are expensive in China compared to the western
countries. The higher price is due to import taxes and the
foreign vehicle tag. As a result, foreign automakers earn almost
two-fold profits in China as against in Europe or the U.S.
However, Tesla does not want to differentiate between customers
in China and those in other countries.
China is one of the biggest auto markets in the world in terms of
number of vehicles sold. Global automakers intend to capitalize
on the increasing sales in the region. Some of the automakers
have also set up production units in China to navigate the high
import duties. In Dec 2013, Renault opened its first factory in
However, electric car producers, including Tesla, are not
interested in setting up production units in China. The Chinese
government demands technology sharing with the local partners for
the vehicles to be considered as domestically produced vehicles.
This may adversely affect the company in the long run.
Model S is integrated with a premium 85 kilowatt hour battery
pack, which enhances its competitive position against
) Audi S5 sedan and Bayerische Motoren Werke AG's 5-series GT
sedan. Tesla expects that Model S shipments to China will be same
as the U.S. sales volume by 2015.
Tesla designs and manufactures electric vehicles and electric
vehicle powertrain components for partners including
Toyota Motor Corporation
). The company currently carries a Zacks Rank #2 (Buy).