- Last week, a Tesla sitting in a Chinese parking lot suddenly burst into flames.
- Over the weekend, Chinese state media published several critical stories about the company.
- Tesla’s image in China is incredibly important. The company is building a factory in Shanghai that is supposed to start churning out cars by the end of the year.
- Tesla is finding out what it’s like when the Chinese media and its netizens stop playing nice and start playing hardball.
- Visit Business Insider’s homepage for more stories.
It started last week when a Tesla Model S sitting in a Shaghai parking garagesuddenly caught fire, burning up a few cars around it. No one was injured and Tesla is investigating the blaze.
The response to that on Weibo, China’s massive microblog, was swift and brutal, according to the state media outletthe Global Times:
“Tesla should be barred from entering garages just like Samsung Note 7s were banned from boarding,” one person with the web name chulvsh wrote in a microblog on Wednesday. “Please give an explanation to the old Tesla owners in China. We can endure water leakage, rough workmanship, random price cuts, worn tires. But now Tesla is threatening our safety with super-fast, self-burning speed. We can’t endure that,” another person with the web name Miu Hongyang wrote in a microblog on Monday.
Tesla broke ground on a factory in Shanghai in January, taking out a $500 million loan from a syndicate of Chinese banks to complete the project. It’s supposed to be churning out cars by the end of this year – though Wall Street has its doubts about that timeline – and that loan is due back to creditors next March.
All of that is to say that Tesla’s success in the country matters a great deal, especially as sales lag in Europe and the US. China has also become a huge market for electric vehicles, though that picture is becoming more complicated by the day, thanks to market saturation and shifting government incentives for electric-vehicle buyers and manufacturers.
“As long as it’s a foreign brand and the people aren’t getting TOO fired up [the government] will allow complaints on social media,” Tu Le, a consultant and founder ofSino Auto Insights, told Business Insider.
As for the fire, he added: “If the Chinese government thought they could gain leverage [on Tesla] or thought it was a real danger they may do something, but right now I think they believe it’s a ‘one off.’”
One-off or not, the Shanghai fire has opened a window for state media to criticize Tesla. A few days after the incident, the Global Times ran stories highlighting issues with two other aspects of Tesla’s presence in China:its sales to local companiesand itsfactory build-out.
To the first point, commercial sales to local companies – such as hotels and ride-hailing services – have always been important to Tesla’s business in China.
Anne Stevenson-Yang of the investment firm J Capital Research wrote in 2016:
Tesla, which has a corona of glamour in the China market, seems to make its sales to companies, not individuals … Tesla debuted its Model S in China in April 2014 and derived 15.3% of its revenue from China in 2014. But registrations did not keep track with sales, as many vehicles sat in the channel or at Tesla’s bonded warehouse. Most buyers, it turned out, used their Teslas for commercial purposes, whether property developers or hotels parking the cars outside almost like props, to demonstrate affluence to potential buyers.
Enter Shenma, a ride-hailing service that bought 278 vehicles from 2016 to 2017, according tothe Global Times. The company is currently seeking compensation from Tesla, claiming that Tesla sold it defective vehicles. To alert the world to this fact, Shenma put up a billboard about it in Times Square.
Le, for what it’s worth, considers the billboard nothing more than a PR stunt.
“They wanted bragging rights for taking on Tesla on their own turf. They knew it would get press here,” he said. “They probably got a small bump in downloads for their app because of it.”
Then there’s the Shanghai factory. Tesla has already been getting flack on Wall Street for its timeline, and this weekendthe Global Timesjoined the chorus. Citing experts, the publication reported that “the rapid construction speed might lead to some problems such as insufficient testing of equipment.”
“I think with how aggressive they’re being with that plant. They’re headed down the same ‘manufacturing hell’ road and have a good chance of repeating mistakes and underestimating the challenge of building in a new country,” he said.
These problems matter, but only so much. As here in the US, Tesla’s image in China is inextricably tied to that of its flamboyant CEO.
“As long as the Chinese still revere Elon [Musk] for being an ‘innovative leader’ Tesla will be fine. I’d keep track of sentiment about him,” he said.