Tesla suffers setback in China as backlash over safety, quality of its electric cars sinks sales by 27 per cent

The decline of nearly 10,000 vehicles in April is a ‘huge setback’, said Gao Shen, an independent analyst in Shanghai
A protest at the Shanghai Auto Show by the owner of a Model 3 that had crashed sparked a social media storm over quality standards at Tesla’s Gigafactory 3

Tesla

Daniel Renin Shanghai

Published: 8:29pm, 11 May, 2021

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Tesla’s sales in mainland China hit a blip last month as the leader in the electric vehicle (EV) field ran foul of angry customers raising concerns about safety and quality.

The US carmaker delivered 25,845 Shanghai-made vehicles in April, 27.2 per cent less than the 35,478 units it sold a month earlier, according to the latest data from the China Passenger Car Association (CPCA). The industry consortium did not break down the sales into the two different models Tesla offers.

“A decline of nearly 10,000 units in sales over just one month is a huge setback for a carmaker,” said Gao Shen, an independent analyst in Shanghai. “But Tesla will maintain its leading position in China’s premium electric vehicle segment for a long time because it has yet to see a powerful rival here.”

Tesla faced a social media backlash from Chinese customers last month over safety and quality issues.

It started on April 19, when a woman in a T-shirt emblazoned with the words “brake malfunction” and a Tesla logo jumped on one of its vehicles at the Shanghai Auto Show, after her Model 3 crashed.

The global EV leader, bowing to pressure from market regulators, said sorry two days later for a delay in resolving the owner’s issue.

It has also released the data log of the car, which crashed in February this year in Zhengzhou, the capital of China’s central Henan province, to the woman. According to local media reports, she and Tesla had been arguing for months about whether the car in question was speeding and if its brakes failed.

Her protest, which came just weeks after Tesla executives were grilled by senior officials about the quality of its Model 3 cars, sparked a wave of angry social media posts from other owners raising their own concerns. The company denies claims that the safety or quality of its vehicles has been compromised in any way.

Tesla’s run-in with owners and regulators about the safety of cars assembled at its Gigafactory 3 in Shanghai had deterred motorists from buying both its Model 3 and Model Y vehicles, Gao said.

A price increase for the Model Y, announced by Tesla in March, would also have dented sales.

The carmaker raised the prices of its made-in-China Model Y sport-utility vehicles (SUVs) by 8,000 yuan (US$1,245) in late March, which suggested it was comfortable with the sales of the car, according to David Zhang, an analyst at the North China University of Technology.

Tesla raised the price of Model Y’s Long Range version to 347,900 yuan, just three months after it launched the SUVs on the mainland.

Despite the dramatic fall in sales, Tesla’s three home-grown Chinese rivals, NIO, Xpeng and Li Auto, were still a long way behind. They delivered 17,788 units on aggregate last month, less than 70 per cent of Tesla’s sales.

The Shanghai Gigafactory 3 also exported 14,174 vehicles in March, according to the CPCA.

“Other new-energy vehicle assemblers in China are also actively making preparations for overseas expansions,” said Cui Dongshu, secretary general of the CPCA.

NIO said last week that it would start selling its cars in Norway in September to take on Tesla and Volkswagen, which currently dominate the EV market in the Scandinavian country.

Reuters reported on Tuesday that Tesla had halted plans to buy a piece of land to expand its Shanghai plant and make it a global export hub, because of uncertainty created by US-China tensions.

With 25 per cent tariffs on imported Chinese electric vehicles imposed on top of existing levies under former President Donald Trump still in place, Tesla now intends to limit the proportion of China output in its global production, it said.

This article appeared in the South China Morning Post print edition as: Tesla’s mainland sales fall 27pc in April after protests and price rises