Shulou(Shulou.com)11/24 Report--

Beijing, February 13 (Xinhua) Tesla's sharp price cuts in China have boosted its sales, but analysts and even Tesla fans have warned that the US carmaker needs to improve its long-term strategy. to avoid being defeated by fast-growing competitors in the world's largest electric car market.

Tesla's price cut at Tesla's Beijing showroom in January had an immediate effect, boosting the delivery of its domestic cars by 18% compared with December last year. Analysts say Tesla's generous profit margins give him the ability to compete on price with competitors in China and elsewhere.

However, analysts also point out that Tesla lags behind Chinese competitors in launching new models, improving navigation systems, adding luxury interiors or providing intimate customer service, which is difficult to meet consumers' changing preferences for electric vehicles.

"Tesla is facing a serious problem with a very limited product portfolio," said Cui Dongshu, secretary-general of the China passenger car Market Information Association (CPCA). Tesla is slow to respond to Chinese consumers' preferences, leaving him in a very passive position and can only rely on a small number of measures such as price cuts to remain competitive. "

Model 3 even Tesla CEO Elon Musk (Elon Musk) himself admits that China is probably the place where Tesla faces the fiercest competition. "they work hardest and are the smartest, so we predict that some companies from China are most likely to become competitors second only to Tesla." Musk said at the end of January.

Tao Lin, Tesla's vice president of foreign affairs, said on Weibo that the company's price reduction in China reflects engineering innovation and responds to the country's call to promote economic development and unleash consumption potential with practical actions.

China's share has been eroded. The China Association of Automobile Manufacturers predicts that sales of electric vehicles and plug-in hybrids will soar 35% to 9 million units in 2023, close to 1/3 of China's total new car sales.

Although Tesla's sales in China, its second-largest market, have increased, its market share has also declined. Tesla's share of China's electric vehicle market has fallen by 1/3 from 15 per cent in 2020 to just 10 per cent in 2022, according to the Federation of passengers.

Tesla has only 10 per cent left in China. Tesla produces two models in China: the Model 3 sedan and the Model Y crossover. This strategy of simplifying the product portfolio has helped them expand their scale and reduce costs. After the latest price reduction, the Model 3 starts at about $34000 and the Model Y starts at $38000.

But after the outbreak, Chinese car buyers returned to the showroom this year, attracting the attention of Tesla's competitors, who offer a wide range of alternative models. BYD surpassed Tesla in global sales last year and has a market capitalization of well over $100 billion, offering more than 60 different versions of electric cars and plug-in hybrids. It is much smaller than Tesla, but ambitious Xilai has increased the number of models from two to six over the same period and plans to launch five more models this year.

"the aging product line is a real problem for Tesla," said Yale Zhang, managing director of Automotive Foresight, a Shanghai-based consultancy. "once BYD and other electric car start-ups follow suit, Tesla's price reduction advantage may disappear in the blink of an eye."

Slow navigation updates Tesla's autopilot software and navigation system make Musk proud and touted as a competitive advantage, but these features have also been criticized by customers for slow updates and errors on Chinese roads. For luxury electric car buyers who hire drivers, they are reluctant to pay more for the software.

Tesla has been considering adjusting his marketing strategy in China, focusing more on energy efficiency and practical functions than on cutting-edge functions, according to people familiar with the matter. Moreover, the company has been studying how Chinese competitors, led by BYD, can win customers in showrooms, especially in small cities.

Tesla learned from the research that BYD ensures that the bottled drinking water provided to visitors in the exhibition hall is warm in winter, in order to cater to local preferences.

Tesla also gave his China sales team more direct access to product development engineers to provide local feedback, according to people familiar with the matter. Earlier this year, Tesla promoted Zhu Xiaotong, president of Greater China, to global sales and production director.

It is true that Tesla's design aesthetics still attracts many people, including simple interiors and artificial leather.

Cui Yang, a 31-year-old doctor, bought a Tesla in Beijing after the recent price cut. He said he was attracted by Tesla's "minimalist interior style and sense of technology".

By contrast, Chinese brands such as Ulay and extreme Krypton are touting their buttery-smooth Napa leather and traditional luxury features such as massage seats to provide the same experience for passengers and car owners. Some electric car manufacturers believe that the high-end electric vehicle market will grow rapidly in the coming years.

BYD Seal's ideal car is aimed at buyers who are looking for electric cars that can travel with their families. The psychological price of these buyers will be higher than Tesla's current starting price of $44000. Ideal expects this sales category to represent market sales of 10 million vehicles by 2025.

Next, Tesla faces the challenge of "buying domestic cars" in China. Chinese consumers such as 50-year-old Lin Wenwei want to support a domestic brand, even though Tesla's car is made locally.

"I've always been more inclined to buy domestic electric car brands for national industry," said Lin Wenwei, who bought his own BYD dolphin hatchback while trying out seals for his son at a BYD dealership on the outskirts of Shanghai.

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