Chinese Tesla owners are up in arms after the electric automaker slashed prices on several models — a bold move that could spell bad news for the company’s domestic competitors, according to industry insiders.
Over the weekend, photos and videos of Chinese people holding banners in front of Tesla stores in Changsha, in the central province of Hunan, went viral online. In one photo, a banner claims that Tesla’s “random price cut” had “infringed customers’ legal rights and interests.”
On Feb. 28, Tesla had announced its cheapest car to date: a $35,000 version of its Model 3, which previously started at $42,000. In addition, the company cut the starting prices of eight versions of the Model S and Model X, dropping their prices by $12,000 to $18,000 less than before.
The dramatic price reduction may be great news for anyone hoping to buy a Tesla in the near future, but for Chinese people who already own one of the high-priced status symbols, it’s proving to be a difficult pill to swallow. Since Thursday, Chinese netizens have been bombarding Tesla’s official Weibo microblog with vitriol, accusing the company of not caring about its existing customers.
“I received a Model X on Feb. 25 and was [later] informed that the price had dropped by 174,300 yuan [$26,000]. I had only driven it for five days. How would you feel if you were in my position?” one Tesla owner claimed on Weibo, estimating that — including tariffs, interest on loans, and various taxes — he had probably overpaid for the car by 200,000 yuan. He complained that he wanted to return the vehicle.
Some unsatisfied customers even vowed to take legal action in response to the price cuts. Two Tesla owners in Wuhan, the capital of central Hubei province, sent a lawyer’s letter to the company’s offices in China — as well as to its mercurial CEO, Elon Musk — demanding that Tesla refund the price difference in order to “protect the old owners’ interests.”
Some netizens, however, have expressed doubts about whether the Tesla owners are entitled to their indignation. “The owners protest when the prices drop, [but] what would they do if the prices increased?” one netizen asked on Weibo. “It’s just like those who invested in China’s property market and protested when home prices dropped, because they missed the chance to take advantage of it.”
Tesla has yet to address the peeved patrons from its social media accounts in China, and the company had not responded to Sixth Tone’s interview request by time of publication on Monday. However, Tesla announced Friday on its official website that any customers who had purchased a Tesla before the price decrease would be eligible for 50 percent discounts on either the Autopilot or Full Self-Driving upgrades.
This concession seems to have done little to placate the cantankerous customers. “It’s unacceptable,” one Tesla owner commented on Weibo. “So Tesla’s solution is just to ask us to keep buying their products but at a discount?”
Han Lu, an automotive analyst in Beijing, told Sixth Tone on Monday that Tesla’s price cuts would put pressure on China’s electric vehicle makers to follow suit. “The drastic price reduction will not only torture Tesla but also its competitors,” he said. “If premium electric carmakers like Tesla lower their prices, the competition will be more fierce — and small- and medium-sized automakers whose greatest strategic advantage is a lower price point will find it hard to survive.”
Yet even as overall passenger vehicle sales fell by 7 percent in China in 2018, domestic sales of electric vehicles have soared. At the end of last year, Tesla announced three separate price cuts in China — the world’s largest auto market and Tesla’s second-largest market after the U.S.
While the Silicon Valley darling has been betting big on China, with several high-profile visits and a $5 billion “gigafactory” in Shanghai, it also faces uncertainty due to the ongoing China-U.S. trade war and greater competition from domestic automakers.
According to filings submitted to the U.S. Securities and Exchange Commission in February, Tesla’s 2018 revenue in China dropped to around $1.8 billion, down 13 percent year-on-year. Chinese carmakers such as Nio and Xpeng Motors are also favored by Chinese consumers for their affordable prices and high cost-to-performance ratios. According to Nio’s latest data, the company sold more vehicles domestically than Tesla in January of this year.
Editor: David Paulk.
(Header image: A man walks by Tesla’s China headquarters at a shopping mall in Beijing, July 11, 2018. Jason Lee/Reuters/VCG)