Tesla Motors, Inc. 's ( TSLA ) 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.
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 price.
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 China.
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 Volkswagen AG 's ( VLKAY ) 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 ( TM ) and Daimler AG ( DDAIF ). The company currently carries a Zacks Rank #2 (Buy).