China's state mouthpiece just put Tesla on notice

  • Tesla recently said in a Weibo post from its official account that it would provide 0% financing and a licence-plate rental service for customers in Beijing.
  • Renting out licence plates in the region is “technically illegal,” Tu Le, the founder of Sino Auto Insights, a Beijing-based consultancy, told Business Insider.
  • China’s state media published an article questioning the legality of the offer Tesla made to customers in the country and suggested that the company be investigated by authorities.
  • It’s yet another sign of the difficulties Tesla faces navigating the Chinese market.
  • A Tesla representative told Business Insider the company did not rent licence plates in Beijing and had updated its Weibo account to reflect that. The person declined to respond to repeated questions about whether the company had intended to make an illegal offer.
  • Trump’s trade war, a declining Chinese auto market, and a swiftly changing Chinese electric-vehicle market are also adding complexity to Tesla’s move.
  • Visit Business Insider’s homepage for more stories.

On Tuesday, the Chinese state media mouthpiece Global Times put Tesla on notice with a story headlined “Tesla’s new discount policy in Beijing draws concerns over legality on Chinese social media.”

The article took aim at Tesla’s promised discount to Chinese customers. The company, which is building a plant in China to manufacture cars for that market, promised 0% financing and a licence-plate rental service for customers in Beijing.

The part involving licence plates is a huge deal. Beijing caps the number of auto licenses that are issued every year, and they are given out based on a lottery system. People applying to own an electric vehicle get most of that quota in 2019 (60,000 out of 100,000), but even they can still wait as long as eight years for a licence. As of December, 3 million people are on the waiting list, according to a report by China Daily.

So Tesla’s offer was a sweet one, but as the Global Times notes, it’s also illegal. Apparently, Chinese netizens noticed that too.

From the story:

“Industry insiders said that the measures signalled the carmaker is betting big on Chinese market despite the trade war and fierce competition from Chinese electric start-ups. “But some consumers and netizens do not seem to buy the explanation for the policies, with some even reporting and forwarding Tesla’s announcement to the official Weibo account of the Beijing Municipal Commission of Transport (BMCT). “‘It’s a big discount, but are you sure your licence plate rental service is not on the edge of the law? This is a violation of policy,’ asked a Weibo user named Yuanlaiyoushiyitian.”

A Tesla representative told Business Insider the company did not rent licence plates in Beijing and had updated its Weibo account to reflect that. The person declined to respond to repeated questions about whether the company had intended to make an illegal offer.

Got a story about Tesla in China or Tesla in general? Email this reporter at [email protected]

Tesla’s timing isn’t helping

This is coming at a delicate time for Tesla, Chinese electric-vehicle companies, and the Chinese auto market. Tesla, coming off a disastrous first quarter, has yet to build its first car in China, and experts tell Business Insider it still has a lot to learn about doing business in the country.

“They have a ton of challenges ahead just to get the cars on the road,” Tu Le, the founder of the Beijing-based consultancy Sino Auto Insights, told Business Insider.

As for Chinese electric-vehicle companies, they are facing tightening government regulations and fewer incentives for buyers. The government is trying to shake out weak hands in the market – where recently rolled-back incentives created hundreds of electric-vehicle startups, some have never manufactured a single car.

And then there’s China’s auto market overall, which has continued a decline it started last year. The fact that $US72 billion worth of inventory will be out of compliance with new emissions standards set to take effect in July isn’t going to help matters.

Neither does US President Donald Trump’s trade war with China. One netizen quoted in the Global Times story said that officials should crack down on Tesla’s licence-plate promise because China had been “pushed to this point amid an escalation of the trade war.”

“Renting out plates is technically illegal, but people still do it,” Le said. “I haven’t heard of any crackdowns, but this is a different time, especially if the domestic EV startups struggle.”

Le says the Chinese government will want 10 to 12 of the strongest domestic electric-vehicle companies to succeed because it believes that manufacturing that kind of technology is China’s future. It already bailed out Tesla’s rival Nio, for example.

For Tesla to succeed, it will have to keep not only the Chinese government and its media but also the country’s netizens on its side. Image matters, and Tesla already faced protests in China back in April when it cut prices suddenly and customers who’d just bought cars beforehand felt snubbed.

There was a reminder of that misstep in the Global Times story too. It said Tesla’s “frequent sales adjustments have also tainted its image among Chinese consumers” and quoted a young Beijing resident who described preferring to buy from a domestic electric-vehicle maker.

Got a story about Tesla in China or Tesla in general? Email this reporter at [email protected]

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.