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3 Reasons Tesla Motors Inc.'s Hong Kong Strategy Is a Winning One

Tesla Motors plans to more than double its workforce in Hong Kong to more than 100 people by the end of the year, according to a recent press release on the Hong Kong government's website that quotes Tesla's vice president of China operations Veronica Wu. This expansion is due to anticipated increased demand for the Model S and significant initial demand for the Model X in Hong Kong, a largely autonomous area that's a Special Administrative Region, or SAR, of the People's Republic of China.

It often seems to fly under the radar that Hong Kong was and remains a pivotal component of Tesla's strategy to electrify the roadways of China. The electric carmaker began taking pre-orders from Hong Kong buyers in July 2013 -- and received more than 300 in that month, despite the fact that pricing hadn't been established -- a month before it started taking pre-orders in mainland China.

I've previously written about three reasons Tesla is likely to spark Teslamania in China . However, I didn't touch upon Tesla's strategy of leading with Hong Kong to help conquer the extremely important Chinese market. Here are three reasons this is a winning plan.

Supercharger station coverage planned by the end of 2015. Source: Tesla Motors.

3. Hong Kong is a trendsetter in the region

This is the most important reason, in my view, with the first and second reasons simply playing a supporting role.

In many ways, Hong Kong is to mainland China as California -- and perhaps New York City, in some respects -- is to the United States. Products and styles that become popular in affluent Hong Kong often gain a following among the people in mainland China. So, anything Tesla can do to continue to win favor with Hong Kong consumers should help in its sales efforts in mainland China, a country that's going to be an ever-increasingly key factor in Tesla's success going forward.

China is already the world's largest auto market and the world's third-largest luxury auto market behind Europe and the U.S. However, because sizable waves of its humongous population of more than 1.3 billion continue to enter the middle and more affluent classes, China's lead as the world's largest auto market should continue to expand. More important, China is projected to surpass the U.S. as the No. 2 luxury auto market by 2017 and leapfrog over No. 1 Europe by 2020.

Takeaway

It's too early in the Hong Kong and China game to state anything definitively, though investors will soon learn more about how eagerly the region is initially embracing the Model S when Tesla reports Q3 earnings in a month. However, given Tesla's smart "lead with Hong Kong" strategy, its already speedy buildout of Superchargers in mainland China, and its recently announced partnership with China's No. 2 mobile carrier China Unicom to install charging stations at 400 China Unicom stores in 120 cities, it seems Tesla is on track to electrify the roadways of China.

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The article 3 Reasons Tesla Motors Inc.'s Hong Kong Strategy Is a Winning One originally appeared on Fool.com.

Beth McKenna has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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