The announcement came on Weibo, the Chinese Twitter type social network: “TESLA Model S reservations are being accepted.” And with that, Elon Musk launched the Tesla brand in China. The Chinese market is particularly prosperous at this point in history, with an exploding middle class aching to dump money into American made luxury goods. There is definitely room for savvy business professionals like Elon Musk to make moves in that marketplace. Tesla is also part of America’s green initiative to create a vehicle that can run viably on electric power. Will the car face staunch competition in the far East, or worse, a rising market for knock-offs?
Tesla is no stranger to controversy. The California based company sued a designer that tried to produce an early model roadster for the company. Henrik Fisk’s design was not up to Elon Musks standards and he was canned. Fisk would go on to try and make is own electric car but Tesla’s response was a lawsuit. Eventually Tesla would lose the suit, and fall right into a dispute between the company founders. The car itself has some image problems to contend with as well. In 2008, the British television show Top Gear showed host Jeremy Clarkson pushing his dead Tesla into a garage and complained about the 55 mile limit he experienced with the car.
Entrepreneur Rich Gorman knows about controversies, and has prospered from his ability to welcome different points of view. Thus far, Tesla has mimicked that think tank approach by carefully rolling out its cars to cities and testing consumer reaction to them.
Tesla Business Model
One of the stated goals of the Tesla motorcar company is to increase the availability of electric vehicls to the public. The company is able to charge less for the batteries its cars need to function because they utilize a standard casing that reduces cost. The company also plans to sell its patented technology to other auto makers to help hasten the deployment of electronic vehicles. Tesla hopes that its business of creating and distributing electronic cars will awaken a consumer interest for green technology and for sustainable use vehicles in particular.
The company has already managed to cut the cost of its vehicles in half and plans to launch a $30,000 dollar model soon. That puts green car technology into the hands of most middle class consumers within a few years time.
Enter the Chinese Market
The Chinese have a growing interest in green technology stemming from pressures abroad. The catalyst of industrialization has created a dilemma for modern China. The country has growth that is somewhat unprecedented for its time, yet the waste produced is harmful to the world at large. This is where a brand like Tesla stands to gain on the market. Tesla’s limited deployment in the Chinese market has created a kind of rabid demand. China has a large population of millionaires, and growing, far more than the US.
The new tradition is one of differentiating from friends and neighbors, and Tesla’s limited quantity is exactly the kind of status symbol that will be sought after. Proprietary technology also means that Chinese knock-offs are less likely to run as smoothly and perform as well as a Tesla car, so the company branding will carry more meaning there.
Knock-offs are inevitable as the technology is reverse engineered, but Tesla’s availability ensures that the knock-offs won’t come as quickly for Tesla as they may for other brands. It’s the unwillingness to move business overseas that drives piracy, not the need for status. China is a strange market for many Westerners to comprehend, but Tesla seems poised for a winning launch there.