Tesla’s struggles in China continue amid vehicle flaws and increased local competition

While the company’s share price can’t be attributed to one specific factor, Tesla’s currently seeing a significant decrease in the number of cars sold in China.

What’s going with Tesla’s stock price?

• The Elon Musk-owned Tesla is just one of many tech companies to have seen massive profits in 2020.

• And while the company still has a relatively high share price, its current price – which is hovering at around US$600 – is about 30% lower than its peak price of US$880 from back in January of this year.

• While the company’s share price can’t be attributed to one specific factor, Tesla’s currently seeing a significant decrease in the number of cars sold in China.

• Part of the reason may be due to recent criticism over flaws in Tesla’s vehicles, but it’s also almost definitely thanks to increased competition the company is facing in China’s electric vehicle market.

Why are Tesla’s sales in China dropping?

• Recently a video that involved a woman at a Tesla event protesting the company in China went viral.

• The woman was expressing her anger at the company after an alleged brake failure occurred – an issue other Tesla drivers have complained about in the last several months on social media.

• Tesla claims that the protester’s accident occurred because of speeding and they would not be compensating her for the wrecked car.

• On Weibo, which is China’s version of Twitter, Tesla responded by saying that they would not give in to “unreasonable demands.”

• Global Times, a Chinese state-led media company, responded to Tesla by saying that, “the arrogant and overbearing stance the company exhibited in front of the public is repugnant and unacceptable, which could inflict serious damage on its reputation and customer base in the Chinese market.”

How is Tesla’s new competitor matching up with the company?

• Since last July, SAIC-GM-Wuling Automobile Co. has been outperforming Tesla in China as customers flock to their low-priced electric vehicles.

• The company is a joint venture between Chinese state-backed automobile companies SAIC Motor Corp. and Guangxi Automobile Group Co. and GM Motors – one of the largest automobile companies in the United States.

• The company’s car, which is called the Hongguang Mini, is an incredibly compact electric car that sells at a starting price of US$4,500.

• Compared to the nearly US$40,000 selling price of Tesla’s Model 3, the Hongguang Mini is nearly 90% cheaper while still satisfying their customer’s needs.

• “Our company’s mentality is to produce whatever people need,” said Zhang Yiqin, the company’s head of marketing. “We keep close tabs on our users. The hurdles to electric car adoption can only be cleared when consumers find using them a comfortable thing.”

How is the government involved?

• China has not shied away from enforcing strict punishments on individuals and companies that they believe have misled the public.

• Huarong China, one of the largest distressed asset managers in China, was found to have been involved in illegal activities that led to the leader of the company being executed.

• In response to Tesla’s recent mechanical problems, China’s state media has requested an investigation into the company.

• The government has also spoken out against both the company’s response and its actions.

• “Individuals should not take extreme measures, and enterprises should not be arrogant and unreasonable,” said the Central Commission for Discipline Inspection.

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